Economic Problem

Question 1

What are goods?

Answer 1

1. Goods are actual tangible objects
2. They can be touched, felt and held.
3. They are produced and consumed.

Question 2

What are services?

Answer 2

1. Services are activities/experiences
2. They are intangible
3. They are provided by other people or businesses.

Question 3

Examples of goods and services:

Answer 3

Hilton, Starbucks, Nike and Apple

Question 4

What is a need?

Answer 4

1. A need is any good or service that we require or that is necessary for our survival such as food and water.

Question 5

What is a want?

Answer 5

A want is any good or service that is desired but is not necessary. For example, we need clothing to survive but we may want branded cloths to be fashionable.

Question 6

What are factors of production?

Answer 6

1. Land - natural resources ranging from actual land space to air, minerals, lakes, climate.
2. Labour - Human resources or a nations population.
3. Capital - any man-made item to help production e.g. machines and offices.
4. Entrepreneur - This is organizing the land, labour, capital and taking the risk.

Question 7

What is an opportunity cost?

Answer 7

The cost of the next best alternative(1) given up (when making a choice)(1)
For example, if you bought a car this year you may not be able to afford to go away on holiday. So, the opportunity cost of purchasing the car is the missed holiday.
When we are making such a choice we will attempt to consider the costs and benefits with both options.

Question 8

What are the costs of having children?

Answer 8

1. Financial costs: baby expenses, health and education costs, additional costs.
2. Opportunity costs: “ Damage “ to a career, less freedom in terms of taking holidays, goods that could have been bought with the money used to pay for prams.

Question 9

What are the key economic questions?

Answer 9

1. What to produce? E.G. Education or health care.
2. How to produce? To get maximum use out of resources.
3. Who is to benefit from the goods and services produced? Because we cannot satisfy everyone’s wants and needs.
   “ Scarce resources and unlimited wants ”

Question 10

What is production possibility curve (PPC)?

Answer 10

A production possibility curve (PPC) shows the maximum combinations of two goods that an economy can produce in a given period of time with all its resources fully and efficiently employed.

Question 11

Illustrating your Leisure Choices:

Answer 11

1. Economists love to use models/graphs to illustrate economic theory
2. To do well in Economy - you will have to grow to “love” using models and graphs when explaining things.
3. Plot your own “leisure possibilities curve”: X-axis rugby, Y-axis travelling.

Question 12

What is production possibility curve?

Answer 12

A simple representation of the maximum level of output ( rugby and travelling ) that an economy can achieve when using existing resources in full.

Question 13

Where PPC model is use?

Answer 13

The PPC model is used in economics to illustrate the concepts of scarcity, choice, and opportunity cost.

Question 14

What is productive efficiency?

Answer 14

Productive efficiency - all resources (land, labour and capital) used to full potential.

Question 15

What is an unattainable?

Answer 15

Unattainable - unless the curve moves out.

Question 16

What is productive inefficiency?

Answer 16

Productive inefficiency - some resources (land, labour and capital) will be unemployed.

Question 17

What is an economy growth?

Answer 17

1. Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period to another.
2. If any of the factors of production (land, labour, capital and entrepreneur) increase or decrease there is the potential for positive or negative economic growth.

Question 18

3 economic questions:

Answer 18

What to produce?
How to produce?
For whom to produce?

Question 19

What is an economic problem

Answer 19

Allocation of finite resources to meet infinite wants.

Question 20

PPF

Answer 20

Line that shows all the different combinations of two goods an economy can produce if it uses all resources fully.

Question 21

Consumer goods

Answer 21

Goods purchased by households such as food, confectionery, cars, tablets and furniture.

Question 22

An example of scarce resource:

Answer 22

Oil