UNIT 1

Question 1

What is economics

Answer 1

A social science that studies how human beings use their limited resources to satisfy their infinite needs and wants and how they improve their economic well-being.

Question 2

Scarcity

Answer 2

It refers to the limited availability of resources relative to the unlimited needs and wants of the population. How to allocate these resources

Question 3

Choice

Answer 3

Economics is a study of choices as not all needs and wants can be satisfied. Economics not only looks at these choices but also the consequences of them

Question 4

Efficiency

Answer 4

This is a quantifiable concept that can be measured by the ratio of inputs to outputs. Allocative efficiency refers to making the best possible use of resources to produce the optimum combination of goods and services

Question 5

Equity

Answer 5

This refers to the concept of fairness in which economic outcomes are similar for different people or different social groups.

Question 6

Economic well being

Answer 6

This refers to the level of prosperity and quality of living standards enjoyed by members of an economy

Question 7

SUSTAINABILITY

Answer 7

The ability to manage resource use in a way that does not have a negative impact on future generations

Question 8

Change

Answer 8

The economic world is in a continuous state of flux as conditions change locally, nationally and internationally.

Question 9

Intedependance

Answer 9

ll economic actors (Consumers, Firms, Workers, Households and Governments) interact with one another and as a result have an effect on each other

Question 10

Intervention

Answer 10

This refers to government action in economic activities as it seeks to achieve policy objectives or correct market failure.

Question 11

Factors of production how are they paid for them

Answer 11

Land - rent
labor - wages
capital - interets
enterprise - profits

Question 12

Opportunity cost

Answer 12

The ‘next best’ alternative forgone when an economic decision is made.

Question 13

Economic goods

Answer 13

Goods that are produced with scarce resources, and therefore have an opportunity cost and a price; for example, a computer or apples.

Question 14

PPC

Answer 14

The curve that shows the maximum combination of goods a country can produce in a specific period of time, using all of its resources and the available technology in the most efficient way.

Question 15

Leakages in circular flow of income model

Answer 15

savings, taxes and imports.

Question 16

injections in CF of income model

Answer 16

Investment, goverment spending, exports

Question 17

Leakages> injections

Answer 17

National income will fall –> Economy shrinks

Question 18

Injections > leakages

Answer 18

National income increases –> Economy grows

Question 19

Neoclassival vs classical regarding the value of a good

Answer 19

Neoclassical –> value consumers place on it based on ‘utility’
Classical –> costs of labor and other inputs requiered in production

Question 20

Utility

Answer 20

Measure of satisfaction or usefulness a consumer receives when they consume a product.

Question 21

Total Utility

Answer 21

The total satisfaction gained by consuming a certain amount of a good or service.

Question 22

marginal utility

Answer 22

The benefit gained from consuming one additional unit of a product or service.

Question 23

Circular flow of income diagram

Answer 23