Economics & Business CAT 2026

For a CAT

Want

Something one would like to have but doesn’t need for survival and is often related to personal preference.

Good

A tangible product

Service

An intangible act provided for someone

Inputs

Refers to the combination of items that a business puts into the production process of creating a good or service,

Question

Answer

What is a need?

A need is something essential for survival.

What is a want?

A want is something desired but not necessary for survival.

What is a good?

A good is a tangible physical product that can be bought or sold.

What is a service?

A service is an intangible activity or act performed to meet a consumer's needs or wants usually in exchange for payment.

What are inputs?

Inputs are the resources used by a business in the production of goods or services.

What are outputs?

Outputs are the final goods or services produced by a business.

What is opportunity cost?

Opportunity cost is the value of the next-best alternative given up when a choice is made.

What is an economic choice?

An economic choice is a decision about how limited resources are allocated to satisfy needs and wants.

What is the difference between a good and a service?

A good is tangible and physical whereas a service is intangible and involves an activity or act being performed.

What is the difference between an input and an output?

An input is a resource used in production whereas an output is the final good or service produced.

What is the difference between a need and a want?

A need is essential for survival whereas a want is desirable but not essential for survival.

What are the four factors of production?

The four factors of production are land labour capital and enterprise.

What is land as a factor of production?

Land refers to the natural resources used in production such as water minerals and agricultural land.

What is labour as a factor of production?

Labour refers to the human effort skills and work used in production.

What is capital as a factor of production?

Capital refers to man-made resources used in production such as tools machinery and buildings.

What is enterprise as a factor of production?

Enterprise is the owner's ability to organise the other factors of production while taking on business risk.

Give an example of each factor of production being used by a business?

Land could be farmland; labour could be workers; capital could be machinery; and enterprise could be the owner organising these resources and taking risks.

Compare labour and capital.

Labour consists of human effort and skills whereas capital consists of man-made resources such as machinery tools and buildings.

Explain how enterprise combines the other factors of production.

Enterprise involves organising land labour and capital to produce goods or services while taking on the risks associated with the business.

What is a brick-and-mortar business?

A brick-and-mortar business operates from a physical store or location where customers can access its goods or services.

What is an e-commerce business?

An e-commerce business sells goods or services online generally through a website or digital platform rather than a physical store.

What is a franchise?

A franchise is a business arrangement in which a person pays to use an established business's brand systems and products.

What is an import?

An import is a good or service purchased from another country for use or sale domestically.

What is an export?

An export is a good or service produced domestically and sold to another country.

What is a service business?

A service business provides skills labour or activities to customers rather than primarily selling physical goods.

Compare brick-and-mortar and e-commerce businesses.

A brick-and-mortar business operates through a physical location whereas an e-commerce business primarily conducts sales online.

Explain the difference between an import and an export.

An import is purchased from overseas and brought into the domestic market whereas an export is sold from the domestic market to another country.

A business purchases clothing from another country and sells it in Australia. Is this an import or export? Explain.

This is an import because the clothing is purchased from overseas and brought into Australia for sale.

What is a price taker?

A price taker is a business that has little or no control over the market price and therefore must accept the prevailing price.

What is a price maker?

A price maker is a business with sufficient market power to influence or set the price of its goods or services.

Why does a price taker have little control over the price?

A price taker faces strong competition and has little individual influence over the market price so changing its price may cause customers to buy from competitors.

Why does a price maker have greater control over price?

A price maker has greater market power because it faces less direct competition allowing it to influence the price it charges.

Compare a price taker and a price maker.

A price taker has little influence over price and accepts the prevailing price whereas a price maker has greater market power and can influence the price.

Which market structure would you expect to have the least pricing power? Why?

Perfect competition has the least pricing power because many sellers offer identical products and individual firms cannot significantly influence the market price.

Which market structure would you expect to have the greatest pricing power? Why?

A monopoly generally has the greatest pricing power because one seller dominates the market and faces very high barriers to entry and few or no close substitutes.

What is perfect competition?

Perfect competition is a market structure with many sellers identical products easy entry and exit and sellers that are price takers.

What is monopolistic competition?

Monopolistic competition is a market structure with many sellers offering similar but differentiated products with low to medium barriers to entry and some brand control.

What is an oligopoly?

An oligopoly is a market structure dominated by a small number of large sellers with high barriers to entry and significant pricing power.

What is a monopoly?

A monopoly is a market structure with one seller no close substitutes and very high or prohibitive barriers to entry giving the seller significant pricing power.

What are the main characteristics of perfect competition?

Perfect competition has many sellers identical products easy entry and exit and price-taking firms.

What are the main characteristics of monopolistic competition?

Monopolistic competition has many sellers similar but differentiated products low to medium barriers to entry and some brand control.

What are the main characteristics of an oligopoly?

An oligopoly has a few dominant sellers similar or differentiated products high barriers to entry and significant pricing power.

What are the main characteristics of a monopoly?

A monopoly has one seller no close substitutes very high or prohibitive barriers to entry and substantial pricing power.

Compare perfect competition and monopolistic competition.

Both have many sellers and relatively low barriers to entry but perfect competition involves identical products and price-taking firms whereas monopolistic competition involves differentiated products and some brand control.

Compare monopolistic competition and oligopoly.

Both can have differentiated products and some pricing power but monopolistic competition has many sellers and lower barriers to entry whereas an oligopoly has few dominant sellers and high barriers to entry.

Compare oligopoly and monopoly.

Both have high barriers to entry and significant pricing power but an oligopoly has a few dominant sellers whereas a monopoly has only one seller.

Compare perfect competition and monopoly.

Perfect competition has many sellers identical products low barriers to entry and price-taking firms whereas a monopoly has one seller no close substitutes very high barriers to entry and substantial pricing power.

How does the number of sellers differ across the four market structures?

Perfect competition and monopolistic competition have many sellers an oligopoly has a few dominant sellers and a monopoly has one seller.

How do barriers to entry differ across the four market structures?

Perfect competition has easy entry and exit monopolistic competition has low to medium barriers oligopoly has high barriers and monopoly has very high or prohibitive barriers.

How does pricing power differ across the four market structures?

Perfect competition has the least pricing power monopolistic competition has some limited pricing power while oligopolies and monopolies have greater pricing power.

How does the level of competition differ across the four market structures?

Competition is highest in perfect competition remains strong in monopolistic competition is reduced in an oligopoly and is lowest in a monopoly.

A market contains many sellers identical products and very low barriers to entry. Identify the market structure and explain.

This is perfect competition because there are many sellers products are identical and firms can enter or leave the market easily.

A market contains many sellers offering similar but differentiated products. Identify the market structure and explain.

This is monopolistic competition because there are many sellers but their products are differentiated through features branding or other characteristics.

Four large companies dominate a market and new competitors face significant barriers to entry. Identify the market structure and explain.

This is an oligopoly because a small number of large firms dominate the market and entry is difficult due to high barriers.

A single company supplies a product with no close substitutes and faces extremely high barriers to entry. Identify the market structure and explain.

This is a monopoly because one seller dominates the market there are no close substitutes and barriers to entry are extremely high.

Identify the market structure of strawberry farms.

Strawberry farms are an example of perfect competition because many producers sell a largely identical product.

Identify the market structure of sports shoe companies.

Sports shoe companies are an example of monopolistic competition because many sellers offer similar but differentiated products and use branding to compete.

Identify the market structure of supermarket chains.

Supermarket chains are an example of an oligopoly because a small number of large firms dominate the market.

Identify the market structure of a water provider.

A water provider is an example of a monopoly because one provider may dominate the market and faces very high barriers to entry.

What is demand?

Demand is the quantity of a good or service that consumers are willing and able to buy at different prices.

What is the Law of Demand?

The Law of Demand states that all else being equal as price increases quantity demanded decreases and as price decreases quantity demanded increases.

What happens to quantity demanded when price increases?

Quantity demanded decreases assuming other relevant factors remain constant.

What happens to quantity demanded when price decreases?

Quantity demanded increases assuming other relevant factors remain constant.

Why does the Law of Demand occur?

Consumers generally purchase less when prices rise and more when prices fall because price affects their willingness and ability to buy.

What is a demand schedule?

A demand schedule is a table showing the quantities consumers are willing and able to buy at different prices.

What does a demand curve show?

A demand curve shows the relationship between price and quantity demanded.

Why does a demand curve slope downwards?

A demand curve slopes downwards because price and quantity demanded have an inverse relationship under the Law of Demand.

What is a movement along the demand curve?

A movement along the demand curve is a change in quantity demanded caused by a change in the product's own price.

What causes a movement along the demand curve?

A movement along the demand curve is caused by a change in the product's own price.

What is a shift of the demand curve?

A shift of the demand curve is a change in demand caused by a factor other than the product's own price.

What causes a shift of the demand curve?

A shift occurs when a non-price factor such as income preferences consumer confidence or the price of a substitute changes.

What does a rightward shift in demand mean?

A rightward shift means consumers are willing and able to buy more of the good at every price.

What does a leftward shift in demand mean?

A leftward shift means consumers are willing and able to buy less of the good at every price.

How does disposable income affect demand?

An increase in disposable income generally shifts demand right because consumers have greater purchasing power; a decrease generally shifts demand left.

How do consumer tastes and preferences affect demand?

An increase in popularity or preference for a product shifts demand right while reduced popularity shifts demand left.

How does consumer confidence affect demand?

Higher consumer confidence generally increases spending and shifts demand right while lower confidence can increase saving and shift demand left.

How does the price of substitutes affect demand?

If a substitute becomes cheaper demand for the original product generally shifts left; if the substitute becomes more expensive demand for the original product generally shifts right.

Why does an increase in disposable income generally shift demand right?

Higher disposable income increases consumers' purchasing power making them more willing and able to buy goods and services.

Why can a popular trend shift demand right?

A popular trend increases consumers' preferences for the product increasing the quantity they are willing and able to buy at every price.

Why can low consumer confidence shift demand left?

Low consumer confidence can make consumers more cautious about spending causing them to save more and demand fewer goods and services.

What is a substitute?

A substitute is a good or service that can satisfy a similar need or want and can be used in place of another product.

If the price of a substitute decreases what happens to demand for the original product?

Demand for the original product generally shifts left because consumers may switch to the cheaper substitute.

If the price of a substitute increases what happens to demand for the original product?

Demand for the original product generally shifts right because consumers may switch towards the relatively cheaper original product.

Household disposable income increases. What happens to demand for televisions?

Demand for televisions would generally shift right because higher disposable income increases consumers' purchasing power and ability to buy televisions.

A health trend makes sugary soft drinks less popular. What happens to demand?

Demand for sugary soft drinks shifts left because consumer preferences have become less favourable towards the product.

Consumers become less confident about the economy. What happens to demand for expensive furniture?

Demand for expensive furniture would generally shift left because lower consumer confidence can reduce spending on non-essential goods.

The price of train tickets falls. What happens to demand for bus travel?

Demand for bus travel would generally shift left because train travel has become a cheaper substitute.

A product's price increases and consumers buy less of it. Is this a movement or a shift? Explain.

This is a movement along the demand curve because the product's own price changed causing quantity demanded to decrease.

A product becomes much more popular while its price stays unchanged. Is this a movement or a shift? Explain.

This is a shift of the demand curve to the right because consumer preferences changed while the product's own price remained unchanged.

Compare a movement along the demand curve with a shift of the demand curve.

A movement along the curve is caused by a change in the product's own price whereas a shift is caused by a change in a non-price factor.

What is supply?

Supply is the quantity of a good or service that producers are willing and able to sell at different prices.

What is the Law of Supply?

The Law of Supply states that all else being equal as price increases quantity supplied increases and as price decreases quantity supplied decreases.

What happens to quantity supplied when price increases?

Quantity supplied increases assuming other relevant factors remain constant.

What happens to quantity supplied when price decreases?

Quantity supplied decreases assuming other relevant factors remain constant.

Why do producers generally supply more when prices rise?

Higher prices can increase potential profit giving producers a greater incentive to supply more.