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Questions and Answers

What is the definition of entrepreneurship?

The allocation of resources based on market demands.

The act of managing a business with minimal risk.

The creation or extraction of value, viewed as change. (correct)

The production of goods for immediate consumption.

Which of the following best describes scarcity?

A situation where production costs are minimized.

A state where resources are unlimited.

A condition where human wants exceed available resources. (correct)

The process of distributing goods efficiently.

Which economic question addresses the selection of goods to prioritize?

For whom will it be produced?

How will it be produced?

What resources are available?

What will be produced? (correct)

What does the economic question 'For whom will it be produced?' focus on?

Allocating goods based on consumer demand. Signup and view all the answers

What role does risk-taking play in entrepreneurship?

It is essential for creating new business opportunities. Signup and view all the answers

Which of the following is classified as a physiological need?

Basic bodily functions Signup and view all the answers

What is meant by 'self-actualization' in the hierarchy of needs?

Realizing one's own potential Signup and view all the answers

Which factor is NOT categorized under personal factors affecting wants?

Social class Signup and view all the answers

Which of the following is NOT a factor of production?

Social class Signup and view all the answers

Which resource is typically classified as land in economics?

Minerals and forests Signup and view all the answers

How is 'capital' defined in the context of economic resources?

Man-made goods used to produce other goods Signup and view all the answers

Which type of need addresses the desire for love and acceptance?

Social needs Signup and view all the answers

Which of the following best describes labor as a factor of production?

Physical and mental skills of workers Signup and view all the answers

What does the term 'economics' primarily study?

The allocation of scarce resources to satisfy unlimited wants Signup and view all the answers

Who is known for the Invisible Hand Theory in economics?

Adam Smith Signup and view all the answers

Which of the following best describes scarcity?

The limited availability of a commodity that is in demand Signup and view all the answers

What are 'needs' in the context of human wants?

Essential requirements for survival Signup and view all the answers

Which of the following is NOT a part of the hierarchy of needs?

Emotional needs Signup and view all the answers

How does the concept of 'unlimited human wants and needs' affect economic behavior?

It motivates individuals to optimize their resource allocation. Signup and view all the answers

In economics, what does the term 'factors of production' refer to?

Resources that are used to produce goods and services Signup and view all the answers

What is the relationship between scarcity and abundance?

Scarcity is the opposite of abundance. Signup and view all the answers

Study Notes

Introduction to Economics

Economics studies how society allocates scarce resources to satisfy unlimited wants.
Defined as the scientific study of ownership, use, and exchange of scarce resources.
Greek origins: "Oikos" (household) and "Nomous" (management), translating to "household management."

Key Concepts

Scarcity: Limited availability of resources; exists when demand exceeds supply.
Unlimited Human Wants: Constant human desire for more goods and services; satisfaction is never fully achieved.

Types of Human Needs

Needs: Essential for survival, including air, water, food, shelter, and sleep.
Wants: Non-essential desires that vary based on personal, psychological, and social factors.
- Personal factors include demographics like sex, race, and age.
- Psychological factors reflect individual motivations and attitudes.
- Social factors encompass influences from family, social class, and culture.

Hierarchy of Needs

Physiological: Basic bodily requirements.
Safety: Protection from threats and deprivation.
Social: Needs for acceptance, belonging, and relationships.
Esteem: Confidence, recognition, and respect.
Self-actualization: Realizing personal potential.

Economic Resources

Factors of Production:
- Land: Natural resources available in nature.
- Labor: Human input in producing goods, both mental and physical.
- Capital: Man-made goods used for producing other goods.
- Entrepreneurship: Vision and skills required to create and manage businesses.

Role of an Entrepreneur

An entrepreneur organizes and runs a business, assuming financial risks to create value.

Problem of Scarcity

Scarcity highlights that human wants exceed available supply of time, goods, and resources.
Key Economic Questions:
- What will be produced? Focus on prioritizing important goods.
- How will it be produced? Decide on production methods and techniques.
- For whom will it be produced? Allocate goods based on purchasing capacity.

Adam Smith and Economic Theory

Adam Smith: Scottish economist known for the "Invisible Hand" theory, suggesting that self-interest drives economic behavior, benefiting society indirectly.