Economic foundations

What is the primary purpose of economic activity?

The production of goods and services to satisfy needs and wants.

Who are the three main economic groups?

Consumers, producers, and the government.

What role do consumers play in the economy?

They demand goods and services.

What role do producers play in the economy?

They supply goods and services.

What role does the government play in the economy?

They regulate economic activity and provide public goods and services.

What are the four factors of production?

Land, labour, capital, and enterprise.

What does 'land' mean in economics?

Natural resources used in production.

What does 'labour' refer to in economics?

The human effort used in production.

What is meant by 'capital' in economics?

Made goods used to produce other goods and services.

What is 'enterprise' in economics?

The skill and risk-taking ability of entrepreneurs who bring the other factors together.

What is opportunity cost?

The next best alternative foregone when making a decision.

Why do economic agents have to make choices?

Because resources are scarce but wants are unlimited.

What is resource allocation?

The way in which resources are distributed among producers and consumers.

What are markets?

Places or systems where buyers and sellers interact to exchange goods and services.

What are the three main economic sectors?

Primary, secondary, and tertiary.

What is the primary sector?

The part of the economy that extracts natural resources.

What is the secondary sector?

The part of the economy that manufactures and processes goods.

What is the tertiary sector?

The part of the economy that provides services.

What is specialisation?

When individuals, firms, regions, or countries focus on producing a narrow range of goods or services.

What is the division of labour?

When the production process is split into different tasks and each worker does one task.

What are the benefits of specialisation?

Increased efficiency, productivity, and output.

What is a drawback of specialisation?

Workers may become bored and less productive.

What is exchange in economics?

The act of trading goods and services, usually using money.

Why is exchange necessary in a specialised economy?

Because people and firms produce only part of what they need and must trade for the rest.