Unit 1 FY Economics Study Area 1

What is the fundamental economic problem?

• Inflation

• Scarcity

• Economic growth

• Unemployment

Answer explanation

The fundamental economic problem is scarcity, which refers to the limited availability of resources to meet unlimited wants. This concept underpins all economic decision-making.

Which of the following is not an economic resource?

• Land

• Labour

• Money

• Capital

Answer explanation

Money is not considered an economic resource because it is a medium of exchange rather than a factor of production. In contrast, land, labour, and capital are all essential resources used to produce goods and services.

The basic economic problem arises because:

• People are greedy

• There are unlimited wants but limited resources

• Governments do not distribute resources fairly

• Inflation reduces purchasing power

Answer explanation

The basic economic problem arises because there are unlimited wants but limited resources. This fundamental issue leads to scarcity, necessitating choices about how to allocate resources effectively.

What is the study of economics mainly about?

• How to make money

• How society manages its scarce resources

• How to avoid making choices

• How businesses become rich

Answer explanation

The study of economics is primarily concerned with how society manages its scarce resources. This involves understanding choices, trade-offs, and the allocation of resources, rather than just making money or avoiding decisions.

What are the two main branches of economics?

• Demand and Supply

• Microeconomics and Macroeconomics

• Business and Commerce

• Capitalism and Socialism

Answer explanation

The two main branches of economics are Microeconomics, which focuses on individual agents and markets, and Macroeconomics, which studies the economy as a whole, including inflation, unemployment, and economic growth.

Which of the following is an example of a need?

• Food

• Vacation

• Entertainment

• Transportation

Answer explanation

Food is a basic necessity for survival, making it a clear example of a need. In contrast, vacation, entertainment, and transportation are more related to wants or conveniences.

Scarcity is best defined as

• A. A shortage of goods and services

• B. The limited nature of society's resources

• C. Not having enough money to buy something

• D. When producers can't keep up with demand

Answer explanation

Scarcity refers to the limited nature of society's resources, meaning there are not enough resources to satisfy all wants and needs. Thus, the correct answer is B.

Which of the following is the best example of relative scarcity?

• Air

• Sunlight

• Clean drinking water

• Seawater

Answer explanation

Clean drinking water is a limited resource in many areas, making it a prime example of relative scarcity. Unlike air and sunlight, which are abundant, clean drinking water is often not available in sufficient quantities for all.

What is the main difference between needs and wants?

• A) Needs are things we must have to survive, while wants are things that improve our quality of life

• B) Wants are more important than needs

• C) Needs are only for rich people, while wants are for everyone

• D) Needs are things that people desire, while wants are things people must have

Answer explanation

The correct choice, A, accurately defines needs as essentials for survival and wants as enhancements to our quality of life. This distinction is crucial for understanding basic human requirements versus desires.

Suppose you decided to play a round of golf for $50. Golf takes 4 hours to play. If you weren’t willing to play golf you would have been working and earning $30 hourly. What is your opportunity cost of playing golf?

• $50

• $120

• $170

• $200