What did Adam Smith define economics as in 1776?
An inquiry into the nature and causes of the wealth of nations.
How did Lionel C. Robbins define economics in 1932?
As the social science studying human behaviour between unlimited ends and scarce means.
Why is scarcity considered the fundamental economic problem?
Because resources are limited relative to insatiable human wants.
What is opportunity cost in economics?
The value of the next best alternative forgone when a choice is made.
What is another name for opportunity cost?
Real or true cost.
What distinguishes needs from wants in economics?
Needs are essential for living, while wants are desires people can live without.
What is a scale of preference?
A list of human wants arranged by relative importance.
What does microeconomics study compared to macroeconomics?
Microeconomics studies individual units; macroeconomics studies large-scale economic factors.
What are the steps in economic analysis?
Observation, hypothesis, data collection, organization, law formulation, testing, and prediction.
What are economic analysis tools?
Methods, techniques, and instruments to study and interpret economic problems.
What do measures of central tendency provide?
The middle or centre of a data set.
What is the formula for arithmetic mean of ungrouped data?
Mean = sum of values divided by number of values.
How is the arithmetic mean calculated for grouped data?
Mean = sum of frequency times value divided by sum of frequencies.
How does a command economy solve economic problems?
Through central government planning.
How does a capitalist economy solve economic problems?
Through demand, willingness to pay, and the price mechanism.
What factors determine what to produce in an economy?
Consumers’ needs, market demand, income, production cost, resources, and economy type.
What is production in economics?
The creation of goods and services and their distribution to final consumers.
What distinguishes consumer goods from capital goods?
Consumer goods are ready for use without further production.
What distinguishes capital goods from consumer goods?
Capital goods are man-made goods used to produce other goods and services.
What is the difference between direct and indirect production?
Direct production creates goods and services for household requirements.
What is indirect production?
Indirect production uses specialization for exchange.
What are the three types of production?
Primary extracts raw materials, secondary processes them, tertiary provides services.
What are the factors of production?
Land, labour, capital, and the entrepreneur.
What is the reward for capital in production?
Interest.
What does scale of production refer to in a firm?
The size of a firm’s productive capacity or operation.
What are internal economies in a firm?
Advantages from a firm’s own expansion.
Name one effect of internal economies on a firm’s costs.
Lower average cost.
What are internal diseconomies in a firm?
Disadvantages of expansion that reduce efficiency or increase unit cost.
What causes internal diseconomies related to personnel?
Weaker personnel relationships.
What are external economies in production?
Cost advantages from industry or location growth.
What are external diseconomies caused by?
Industry or location expansion beyond a firm’s control.
Give one example of an external diseconomy.
Congestion.
What distinguishes private enterprises from public enterprises?
Private enterprises are individually owned and seek profit; public enterprises are government-owned and provide social services.
How many owners does a sole proprietorship have?
One owner.
What defines a sole proprietorship?
A business owned, financed, and managed by one person with unlimited liability.
What is a partnership in business terms?
A profit-making business formed by 2 to 20 persons under a partnership deed.
How does liability differ between general and limited partnerships?
General partners have unlimited liability; limited partners have limited liability except one with unlimited liability.
What limits shareholder debt in a limited liability company?
Debt is limited to the amount of share capital individually invested during liquidation.
What are the shareholder requirements for private and public limited companies?
Private limited companies have 2 to 50 shareholders and restrict share transfers; public limited companies have at least 7 shareholders, no maximum, and allow public subscription.
What is a cooperative society?
A voluntary self-help organization with democratic management and profit sharing based on patronage.
What is demand in economics?
The quantity consumers are willing and able to buy at a given price, place, and time.
What effect does a higher price have on quantity demanded ceteris paribus?
It causes a lower quantity demanded.
How does exceptional demand differ from the law of demand?
Higher prices may increase or leave demand unchanged in exceptional demand.
What quantity of milk is demanded at a price of 20 according to the milk demand schedule?
18 units are demanded at a price of 20.
What causes a movement along the demand curve?
A change in the commodity’s own price causes movement along the demand curve.
What causes a shift in the demand curve?
Changes in factors other than the commodity’s own price cause a shift in demand.
Name two factors that affect demand besides the commodity price.
Consumer income and advertising affect demand besides commodity price.
What is joint demand?
Demand for goods that are needed together.
What is effective supply in economics?
The quantity sellers are willing and able to offer at a specific price and time.
What effect does a higher price have on quantity supplied, ceteris paribus?
It causes a higher quantity supplied.
What causes movement along the supply curve?
A change in the commodity’s own price.
What causes the supply curve to shift?
Factors other than the commodity’s own price.
Name three factors that affect supply besides commodity price.
Cost of production, technology, and government policies.
When does market equilibrium occur?
When total quantity demanded equals total quantity supplied.
How is excess supply calculated?
Excess Supply equals Supply minus Demand.
What is fiscal policy?
Government use of spending and taxation to influence economic activity.
What do trade policies govern?
International trade through tariffs, quotas, and trade agreements.
What is exchange rate policy?
Managing a country's currency value relative to others by fixing or allowing fluctuation.
How does exchange rate policy manage currency value?
By fixing the currency or allowing it to fluctuate with market forces.
What are income policies?
Strategies for controlling wages and prices to manage inflation.
Name one method used in income policies to control inflation.
Wage caps.
Name another method used in income policies to control inflation.
Price agreements.
What legal measure is included in income policies?
Minimum-wage laws.
What does the production possibility curve show?
Maximum combinations of two goods or services an economy can produce with given resources and technology.
What do points on the PPC represent?
Productive efficiency.
What do points inside the PPC represent?
Feasible but inefficient production.
What do points outside the PPC represent?
Unattainable production with current resources and technology.
Why does the slope of the PPC represent opportunity cost?
Because producing more of one good requires sacrificing some production of the other good.
What does an outward shift of the PPC represent?
Economic growth due to increased production capacity.
What is productivity?
Efficiency of using inputs to produce outputs, measured as output per unit input over time.
What is the formula relating total product, average product, and quantity?
Total product equals average product multiplied by quantity (TP = AP × Q).
What is population density?
The number of people living per unit of land area.
How is population density calculated?
Population density equals total population divided by land area.
How did world life expectancy at birth change from 1975 to 1999?
It rose from 59.7 to 65.6 years.
What does net migration measure?
The difference between immigrants entering and emigrants leaving a country.
How is population growth rate calculated?
Population growth rate equals birth rate minus death rate plus net migration.
What is a population census?
A government count of all people in a country at a specific time to collect demographic data.
What is the difference between a de facto and a de jure census?
De facto counts people physically present; de jure counts permanent residents regardless of presence.
What does Malthusian theory state about population and food production growth?
Population grows geometrically while food production grows arithmetically, causing poverty and famine.
What is the labour market?
The market where workers supply labour and employers demand it for wages.
Who makes up the labour force?
Employed and unemployed people willing and able to work and seeking jobs.
What is labour mobility?
The ability and willingness of workers to move between jobs or locations.
What does labour efficiency measure?
Workers' ability to produce maximum output with minimum effort and resources.
What determines labour demand?
The quantity of workers employers want to hire at different wages over time.
What is labour supply?
The total hours workers are willing and able to work at various wage rates.
What happens when labour demand exceeds supply at current wages?
It causes excess demand and tends to raise wages.
How does a wage differ from a salary?
A wage is paid by time or output, a salary is a fixed regular payment.
What is agriculture?
The science, art, and practice of cultivating soil, growing crops, and raising animals.
What are the main components of agriculture?
Crop production, livestock farming, forestry, and fish farming.
What distinguishes subsistence agriculture from commercial agriculture?
Subsistence agriculture produces mainly for family use with little surplus, while commercial agriculture produces for market sale using modern technology.
What does mixed farming combine on the same farm?
Crop production and livestock rearing.
What is a benefit of mixed farming related to manure?
Manure is used as fertilizer.
What does organic agriculture avoid?
Synthetic fertilizers and pesticides.
What four emphases define organic agriculture?
Natural processes, environmental health, economic profitability, and social equity.
Name three major agricultural problems.
Climate change, soil degradation, and water scarcity.
Test your knowledge with 59 questions on Year 10 Economics Fundamentals.
1. How did Lionel Robbins define economics in 1932?
2. Why is scarcity considered the fundamental economic problem?
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