Unit the basic economic problem

Question 1

Want

Answer 1

Is something we desire to have eg pet

Question 2

Need

Answer 2

Is the basics of survival eg shelter

Question 3

Factors of production

Answer 3

Land - raw materials eg oil
Labour - work force eg workers
Capillaries - machinery eg tolls
Enterprise - enetprenuer who brings all factors of production together

Question 4

Good

Answer 4

Items we can finically touch

Question 5

Service

Answer 5

Something that is provided eg education

Question 6

Are factors of production limited

Answer 6

Yes

Question 7

Oppertunity cost

Answer 7

Is the next best alternivite choice

Eg you go yo the shops you can either buy a twin or a mars bar, if you chose the twix the Oppertunity cost is the mars bar

Question 8

Oppertunity cost induviduals, firms and government

Answer 8

Induviduals - mxamixe untility - limited income - decide what to spend limited incom to maximize utility

Firms - maximize profit - limited factors of production - produce in oder to maxmize profit

Government - maximize people welfare - limited revenue - decide what goos and services to provide to maximize welfare

Question 9

The basic economic probelm

Answer 9

The basic economic problem is scarcity

Wants are unlimited whereas the factors to make theses resources are limited

This is why no one in the world can have all the goods and service they easier

This means everyone has to make choices to maximize utility

Question 10

Wages

Answer 10

A fixed regular payment earned for work or sevice

Question 11

Salaries

Answer 11

Fixed regular payment

Question 12

State benifits

Answer 12

Sum of money paid by the government of people in certain circumstances

Question 13

Tax credits

Answer 13

Payment for people earning low incomes

Question 14

Pensions

Answer 14

Tax-free savings for retirment

Question 15

Investments

Answer 15

Spending on capital goods

Question 16

Disposable income

Answer 16

Incomeleft agfter taxes have been deducted

Question 17

Discreattionary income

Answer 17

Income left over after taxes and essential bills

Question 18

Why do induviduals save

Answer 18

Emergency funds
Treating yourself e;g handbag
Financial protection
Reterirment
Future spending

Question 19

Ways to save

Answer 19

Cash ISA- tax-free savings

Instant access savings - can make withdrawals anytime - access at any time

Question 20

Why do people borrow

Answer 20

To buy assets eg car
To cover unexpected hours repairs wig boiler
Day to day expensive

Question 21

Ways to borrow

Answer 21

Mortgage - loan to half you buy property
Credit card
Bank loan
Payday money lenders - small amounts of money which is loaned

Question 22

Budgeting

Answer 22

A forward fincail of likely income and expenses for a given period

Question 23

Causes of financial uncertainly

Answer 23

Change in prices/ rate of inflation - can only buy basics

Change in tax - less disposible income

Change in interest rates - people borrowing need to pay more
- people encouraged to save more

Question 24

Demand

Answer 24

How willing and able a purchaser is to buy a product

Question 25

Effective demand

Answer 25

Actual amount of goods and services that buyers are producing in the market

Question 26

Why does the demand curve slope downwards

Answer 26

The law of diminishing marginal utility The substitution effect Income effect

Question 27

Untility

Answer 27

The amount of satisfaction gained form consuming products

Question 28

Total utilty

Answer 28

Total satafsction gained for consumer good and services

Question 29

Diminishing marginal utility

Answer 29

As a consumer cosumes an extra unit the stasfaction gained decreases

Question 30

Subsituation effect

Answer 30

As prices rise a consumer will emend less of a product

Question 31

Income effect

Answer 31

As prices of a good rise consumers in some can buy less units of any product

Question 32

Factors affecting demand curves

Answer 32

``` Population Advertising Fashion and trends Incomes Price of substitute goods and services ```

Question 33

Supply

Answer 33

Amount of goods and services that producers are willing to sell at a given price

Question 34

What does a supply curve slope

Answer 34

The profit motive Production and costs New entrants coming into the market

Question 35

The profit motive

Answer 35

When the market prices rises following an increase in demand, this becomes more profitable for firms to increase output

Question 36

Production and costs

Answer 36

When output expands, a firms production costs tend to rise, therefore a higher price is needed to cover theses costs

Question 37

New erants coming into the market

Answer 37

Higher prices may create an incentive for other businesses to enter the market leading to an increase in total supply

Question 38

Effect of prices on supply

Answer 38

Increase price - firms can make more profit by supplying more Decrease - the firm makes less frofit causing supply to contract

Question 39

Shifts in the supply curve

Answer 39

``` Productivity Technology Weather Cost of production Number of firms ```

Question 40

Productivity

Answer 40

the amount produces per unit time

Question 41

Market

Answer 41

Where buyers and sellers of a good or service come together to exchange their good or services for a price

Question 42

Returns to the factors of production

Answer 42

Land - rent Labour - wages Capital - interest Enterprise - profit

Question 43

Short run

Answer 43

At leat one of the factors is fixed and can’t be expended

Question 44

Long run

Answer 44

All the factors of production can be varied

Question 45

Variable costs

Answer 45

Costs that change with level of Output | Eg raw materials

Question 46

Fixed costs

Answer 46

Costs that don’t change with the level of output eg rent

Question 47

Average fixed costs

Answer 47

Fixed costs per unit produced

Question 48

Average variable costs

Answer 48

Variable cost per unit produced

Question 49

Average total costs

Answer 49

Cost per unit

Question 50

Total revenue

Answer 50

Income received by selling items