I know such kinds of goods as consumer aid capiutal goods.
FACTORS OF PRODUCTION
1. What is the reason people cannot satisfy all their wants and needs? The reason people cannot satisfy all their wants and needs is the scarcity of productive resources.
2. What are the factors of production? The factors of production are land, labour, capital, and organization or entrepreneurship. They provide the means for a society to produce and distribute its goods and services.
3. What does the term land mean? An economic term landmeans the gifts of nature or natural resources not created by human efforts.
4. What do economists think of land as a factor of production? Because there are only so many natural resources available at any given time, economists tend to think of land as being fixed or in limited supply. There is not enough good farmland to feed all of the earths population enough, sandy beaches for everyone to enjoy, or enough minerals to meet peoples expending energy needs indefinitely.
5. What is labor in economic theory? The term labour means people with all their efforts and abilities.
6. What is the national labor force? The national labour force is individuals, 16 years of age or older, working or looking for work.
7. What does the size of labor depend on? Since the size of this force is related to total population the number of people available for production activities will grow as the population grows. If the growth of population continues to decline, it eventually affect the growth of the labour force.
8. What categories does labor fall into? There are four major categories of labour that are based on the general level of skills needed to do any kind of job. These categories are unskilled, semiskilled, skilled and professional or managerial.
9. What kind of work do unskilled workers perform? Workers who do not have the training to operate machines and equipment fall into the category of unskilled labour. Most of these people work chiefly with their hands at such jobs as digging ditches, picking fruit, etc.
10. What category do workers with mechanical ability fall into? Workers who have mechanical abilities fall into the category of semiskilled labour. They may operate electric floor polishers, or any other equipment that calls for a certain amount of skill.
11. What kind of work are skilled workers able to do? Skilled workers are able to operate complex equipment and can do their tasks with little supervisions. Examples are carpenters, typists, toolmakers.
12. What is professional labor? Professional labour is workers with high level skills such as doctors, lawyers and executives of large companies.
13. What is a wage rate? Wage rate is a standard amount of pay given for work performed.
14. What are the factors affecting the wage rate? How wage rates are determined can be explained in two different ways. The first deals with supply and demand, the second recognizes the influence of unions on the bargaining process.
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15. What is the third factor of production? The third factor of production is capital the tools, equipment and factories used in production of goods and services.
16. What is the difference between physical and financial capital? The difference between physical and financial capital is that financial capital is the money used to buy the tools and equipment used in production, and physical capital is the tools, equipment and factories used in production of goods and services.
17. When does production take place? The production tooks place when all factors of production are joint together.
18. What is entrepreneurship? Entrepreneurship is the managerial or organizational skills needed by most firms to produce goods and services. It is the fourth factor of production.
19. What role do the entrepreneurs play? The entrepreneur brings together the other three factors of production land, labour and capital.
20. What does the term labour mean? The term labour means people with all their efforts and abilities.
21. What is the difference between land and labour? Unlike land, labour is a resource that may vary in size over time.
22. What is necessary for any country to grow? Since the size of this force is related to total population the number of people available for production activities will grow as the population grows.
23. What kinds of capital do you know? I know such kinds of capital as physical and financial capital.
24. What are the major categories of labour? There are four major categories of labour that are based on the general level of skills needed to do any kind of job. These categories are unskilled, semiskilled, skilled and professional or managerial.
25. What kind of work do semiskilled workers perform? Workers who have mechanical abilities fall into the category of semiskilled labour. They may operate electric floor polishers, or any other equipment that calls for a certain amount of skill.
26. What does the employer receive instead of wages? If employer employs an assistant, to whom he pays a fixed wage, his new employee provides labour in return for payment.
SUPPLY
1. What is supply? Supply is the quantity of a product supplied at the price prevailed at the time.
2. What does the law of supply state? The law of supply states that the quantity of an economic product offered for sale varies directly with its price. If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale.
3. How much of a product will suppliers offer for sale at different prices? If prices are high suppliers will offer greater quantities for sale. If prices are low, they will offer smaller quantities for sale.
4. What factors is supply determined by? Supply is determined price, the cost of production and the period of time allowed to supply to adjust to a change in prices.
5. What categories of costs is it important for a business to analyze? These categories of costs are fixed cost, variable cost, total cost and marginal cost.
6. Whom do we call a supplier? Everyone who offers an economic product for sale is a supplier.
7. What is a supply curve? The supply curve is the graphical representation of the supply function, i.e., of the relationship between price and supply.
8. What does the supply curve show? It shows us how many units of a particular commodity or service would be offered for sale at various prices, assuming that all other factors (such as the cost of production, the period of time involved) remain constant.
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9. What does fixed cost mean? Fixed cost is the cost that a business incurs even if the plant is idle and output is zero.
10. What is variable cost? Variable cost is a cost that changes with changes in the business rate of operation or output.
11. What is total cost? Total cost is the sum of the fixed and variable costs. It takes in all the costs a business faces in the course of its operations.
12. What does marginal cost mean? Marginal cost is the extra or additional cost incurred when a business produces one additional unit of a commodity.
ECONOMIC SYSTEMS
1. What do all societies have in common? All societies have in common an economic system or an organized way of providing for the wants and needs of their people.
2. What does the survival of any society depend on? The survival of any society depends on its ability to provide food, clothing and shelter for its people.
3. What is an economic system? Economic system is an organized way of providing for the wants and needs of people.
4. What are all societies faced with? All societies are faced with scarcity decisions concerning What, How and for Whom to produce must be made.
5. What determines the type of any economic system? The way, in which decisions of providing for the wants and needs of their people are made, determine the type of economic system they have.
6. What are the major kinds of economic systems? There are three major kinds of economic systems: traditional, command and market.
7. How are the main economic questions decided in a society with a traditional economy? In a society with a traditional economy nearly all economic activity is the result of ritual and custom. Habit and custom also prescribe most social behaviour.
8. What are the main advantage and disadvantage of a traditional economy? The main advantage of the traditional economy is that everyone has a role in it. This helps keep economic life stable and community life continuous. The main disadvantage of the traditional economy is that it tends to discourage new ideas and even punishes people for breaking rules or doing things differently. So it tends to be stagnant or fails to grow over time.
9. What is a command economy? A command economy is one where a central authority makes most of the What, How and for Whom decisions.
10. What is the major advantage of a command economy? The major advantage of a command system is that it can change direction drastically in a relatively short time. The second disadvantage of the command economy is the lack of incentives that encourage people to work hard.
11. What disadvantages does the command economy have? The major disadvantage of the command system is that it does not always meet the wants and needs of individuals.
12. What is a market economy? A market economy is an economic system, in which the questions of What, How and for Whom to produce are made by individuals and firms acting in their own best interests.
13. How are the basic economic questions answered in a market economy? There are answers for basic economic questions in a market economy. What to produce? - Business firms produce goods and services
that consumers are willing and able to buy for prices that will yield profits for the firms. How
to produce? - Seeking to compete profitably in the marketplace, individual business owners decide what combinations of productive resources (land, labour, capital and entrepreneurship) they will use in producing goods and services. For whom to produce? - Finished goods and services are distributed to individuals and households who are willing and able to buy them.
14. What is the main incentive of a market economy? The main incentive of a market economy is making a profit.
15. What advantages does a market economy have? A market economy has several major advantages that traditional and command economies do not have. First, a market economy is flexible and can adjust to change over time. The second major advantage of the market economy is the freedom that exists for everyone involved. The third advantage of the market economy is the lack of significant government intervention. The final advantage of the market economy is the incredible variety of goods and services available to consumers.
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16. What is the role of individuals in a traditional economy? Individuals are not free to make decisions based on what they want or would like to have. Instead, their roles are defined. They know what goods and services will be produced, how to produce them, and how such goods and services will be distributed.
17. What is the main advantage of a traditional economy? The main advantage of the traditional economy is that everyone has a role in it. This helps keep economic life stable and community life continuous.
18. What are the disadvantages of a traditional economy? The main disadvantage of the traditional economy is that it tends to discourage new ideas and even punishes people for breaking rules or doing things differently. So it tends to be stagnant or fails to grow over time.
12. Who makes most of what, how and for whom decisions in a command economy? Economic decisions are made at the top and people are expected to go along with choices made by their leaders. It means that major economic choices are made by the government. It decides goals for the economy and determines needs and production quotas for major industries.
DEMAND
1. What is demand? Most people think of demand as being the desire for a certain economic product. That desire must be coupled with the ability and willingness to pay.
2. What does the law of demand state? In economics the relationship of demand and price is expressed by the Law of Demand. It says that the demand for an economic product varies inversely with its price. In other words, if prices are high the quantities demanded will be low. If prices are low the quantities demanded will be high.
3. How do prices affect the quantities demanded? The correlation between demand and price does not happen by chance. For consumers price is an obstacle to buying, so when prices fall, the more consumers buy.
4. What is demand elasticity? Elasticity of demand is a measure of the change in the quantity of a good, in response to demand. The change in demand results from a change in price.
5. When is demand elastic? The demand for some products is such that consumers do care about changes in price when they buy a great many more units of product because of a relatively small reduction in price. The demand for the product is said to be elastic. The demand for a good is elastic when total receipts increase with each decrease in price.
6. When is demand inelastic? Demand is inelastic when a good is regarded as a basic necessity, but particularly elastic for non-essential commodities.
7. What factors is demand influenced by? Demand is influenced by price, the incomes of the demanders and the prices of substitutes.
8. What does the effective demand help to do? Effective demand, that is desire plus ability and willingness to pay, influences and helps to determine prices.
9. How do prices affect the quantities demanded? The correlation between demand and price does not happen by chance. For consumers price is an obstacle to buying, so when prices fall, the more consumers buy.
10. What is a demand curve? The demand curve is the graphical representation of the demand function, i.e., of the relationship between price and demand.
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11. What does the demand curve show? It tells us how many units of a particular commodity or service would be bought at various prices, assuming that all other factors (such as the incomes of the demanders and the prices of substitutes) remain unchanged.
MARKETS AND MARKET STRUCTURES
1. What was a market in ancient time? The term market is an extension of the ancient idea of a market as a place where people gather to buy and sell goods. In former days part of a town was kept as the market or marketplace, and people would travel many kilometers on special market-days in order to buy and sell various commodities.
2. What is a modern market? A modern market is simply a set of conditions permitting buyers and sellers to work together.
3. When is a market created? Whenever people who are willing to sell a commodity contact people who are willing to buy it, a market for that commodity is created.
4. How do different markets operate? Markets operate according to conditions that prevail in them. To understand how the market operates you have to answer questions like the following: How many supplies are there? How large are they? Do they have any influence over price? How much competition is there between firms? What kind of economic product is involved? Are all firms in the market selling exactly the same product, or simply similar one? Is it easy or difficult for new firms to enter the market?
5. How do economists classify markets? Economists classify markets according to conditions that prevail in them. They ask questions like the following: How many supplies are there? How large are they? Do they have any influence over price? How much competition is there between firms? What kind of economic product is involved? Are all firms in the market selling exactly the same product, or simply similar one? Is it easy or difficult for new firms to enter the market? The answer to these questions helps to determine market structure, or the nature and degree of competition among firms operating in the same market. In short, markets can be classified according to certain structural characteristics that are shared by most firms in the market. Economists have names for these different market structures: pure competition monopolistic competition, oligopoly, and monopoly.
6. What is a market structure defined by? Economists classify markets according to conditions that prevail in them. They ask questions like the following: How many supplies are there? How large are they? Do they have any influence over price? How much competition is there between firms? What kind of economic product is involved? Are all firms in the market selling exactly the same product, or simply similar one? Is it easy or difficult for new firms to enter the market? The answer to these questions helps to determine market structure, or the nature and degree of competition among firms operating in the same market.
7. What are the names of different market structures? Economists have names for these different market structures: pure competition monopolistic competition, oligopoly, and monopoly.
8. What is pure competition? Pure competition is a market situation in which there are many independent and well-informed buyers and sellers of exactly the same economic products.. Each buyer and seller acts independently. They depend on forces in the market to determine price. If they are not willing to accept this price, they do not have to do business.
9. What is monopolistic competition? By making its product a little different, a firm may try to attract more customers and take over the economic market. When this happens, the market situation is called monopolistic competition.
10. What separates monopolistic competition from pure competition? The one thing that separates monopolistic competition from pure competition is product differentiation. The differences among the products may be real, or imaginary. If the seller can differentiate a product, the price may be raised a little above the market price, but not too much.
11. What is oligopoly as a market structure? Oligopoly is market dominated by a few large firms providing similar goods and services.
12. What is monopoly? Monopoly is a market in which there is only one seller - a single large firm.
PRICE
1. What role do prices play in a market economy? Prices play an important role in all economic markets. If there were no price system, it would be impossible to determine a value for any goods or services. In a market economy prices act as signals. Prices serve as a link between producers and consumers. Prices, especially in a free market system, are also neutral.
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2. What two important economic functions do prices perform? Prices play an important role in all economic markets. If there were no price system, it would be impossible to determine a value for any goods or services. In a market economy prices act as signals. Prices serve as a link between producers and consumers.
3. What characteristics do prices have in a market economy? The price system in a market economy is surprisingly flexible. Prices in a market economy are also neutral. Prices serve as a link between producers and consumers. In a market economy prices come about as a result of competition between buyers and sellers.
4. Why do buyers and sellers have the opposite intentions and hopes? In economic markets, buyers and sellers have exactly the opposite hopes and intentions. The buyers come to the market larger to pay low prices. The sellers come to the market hoping for high prices.
5. When does the adjustment process take place? Adjustment process must take place when buyers and sellers come together. This process almost always leads to market equilibrium a situation where prices are relatively stable and there is neither a surplus nor a shortage in the market.
6. What is market equilibrium? Market equilibrium is a situation where prices are relatively stable and there is neither a surplus nor a shortage in the market.
7. What messages do price increases and decreases send to producers of goods and services? Price increases and decreases also send messages to suppliers and potential suppliers of goods and services. As prices rise, the increase serves to attract additional producers. Similarly, price decreases drive producers out of the market.
8. How do sellers and buyers use prices? In a market economy prices act as signals. A high price, for example, is a signal for producers to produce more and for buyers to buy less. A low price is a signal for producers to produce less and for buyers to buy more. Prices serve as a link between producers and consumers.
9. What do economists describe as the rationing effect of prices? As a general rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it. Economists describe that as the rationing effect of prices.
MONEY
1. What is money? Basically, money is what money does. This means that money can be any substance that functions as a Medium of Exchange, a Measure of Value, and a Store of Value.
2. How does money function? This means that money can be any substance that functions as a Medium of Exchange, a Measure of Value, and a Store of Value.
3. What is money as a medium of exchange? As a medium of exchange, money is something generally accepted as payment for goods and services
4. What does money express as a measure of value? As a measure of value, money expresses worth in terms that most individuals understand.
5. How does money function as a store of value? Money also serves as a store of value. This means goods or services can be converted into money that is easily stored until some future time.
6. What forms of money are in use in the world today? The different forms of money are in use in the world today. The most familiar are coin and currency. The term coin refers to metallic forms of money. The term currency refers to paper money issued by government.
7. What does the term currency refer to? The term currency refers to paper money issued by government.
8. What is the difference between coin and currency? The term coin refers to metallic forms of money. The term currency refers to paper money issued by government.
9. What are the most important characteristics of modern money? Modern money is very durable. Metallic coins last a long time under normal use and generally do not go out of circulation unless they are lost. Paper currency also is reasonably durable. Modern money also rates high in divisibility. Modern money, however, is not as stable in value.
TAXATION
1. What is the principal purpose of taxation? The principal purpose of taxation is to raise money from individuals and organizations by the state in order to pay for the goods and services it provides.
2. What are the principles of taxation? In general taxes are based chiefly on two principles: the Benefit Principle and the Ability-to-Pay Principle.
3. What do the principles of taxation state? The Benefit Principle of taxation is based on two ideas. First, those who benefit from government services should be the ones to pay for them. Second, people should pay taxes in proportion to the amount of services or benefits they receive. The Ability-to-Pay Principle of taxation says that people should be taxed according to their ability to pay, no matter what benefits or services they receive. This principle is based on three things. First it is not possible to measure benefits, derived from government spending. Second, people with higher incomes suffer less discomfort than people with lower incomes even if they pay higher taxes. Finally, the only means most people have of paying taxes is the income they earn.
4. How are most taxes classified? Most taxes are classified in a few ways: 1) local and national taxes; 2) direct and indirect taxes; 3) income, land, property and sales tax; 4) proportional, progressive and regressive.
5. What are the features of proportional, progressive and regressive taxes? A proportional tax is one that imposes the same percentage rate of taxation on everyone, no matter what their income. Even when income goes up, the per cent of total income paid in taxes does not change. A progressive tax is one that imposes a higher percentage rate of taxation of people with high incomes than on those with low incomes. A regressive tax is one that imposes a higher percentage rate of taxation on low incomes than on high incomes.
6. What is a sales tax? A sales tax is a general tax levied on consumer purchases of nearly all products. It is added to the final price paid by the consumer.
7. What is a main source of government revenue? The main source of government revenue is a personal property.
8. What is a tax assessor? A tax assessor is the person who places value on property for tax purposes.
9. What are the criteria of taxation? One such criterion is that a tax yields enough revenue. A second criterion is clarity. Tax laws should be written so that both the taxpayer and tax-collector can understand them. A third criterion is ease of administration. A tax should be easy to collect. It should not require a large enforcement staff, and it should be designed so that citizens find it hard to avoid. This criterion also includes convenience and efficiency. That is the tax should be administered at the lowest possible cost. A final criterion is fairness. Taxes should be imposed justly.
10. Why must government have criteria and standards when it comes about taxes? In order to have an effective tax system, government must have criteria or standards.
11. What do people think of taxes? People do not always agree about what is or is not fair when it comes to taxes.
