18 Questions
Which of the following best describes the society's primary consideration in the distribution of goods and services?
The immediate beneficiary of the goods
What is the main problem that Applied Economics seeks to solve?
Scarcity of resources
What happens when a society uses all its resources for current consumption?
Its production capacity will not increase
What is the key factor that leads to a division of labor in a modern economy?
Specialization in production
What is the primary economic problem faced by consumer households?
Allocating their finite resources
What should the society decide on to ensure future progress?
The part of resources to be saved for future progress
What are the four main factors of production mentioned in the text?
Land, labor, capital, and entrepreneurship
Which of the following is an example of the multiple use of resources?
Using a plot of land to plant coffee or build a factory
Which of the following is an example of partially replaceable resources mentioned in the text?
Replacing manual labor with technology
Which of the following is an example of a capital good mentioned in the text?
Laptops
What is an example of a consumer good?
Masks
What is an example of a resource allocation decision mentioned in the text?
Deciding whether to produce masks or canned goods
What is the main function of economics in relation to resource allocation?
To help entrepreneurs and the economy allocate resources to meet consumer demands
Which of the following is an example of a natural resource?
Gold
What is the primary factor that determines a worker's wage?
All of the above
Which of the following is NOT an example of a capital good?
Farmland
What is the primary source of income for entrepreneurs?
Profits
What is the fundamental reason for resource scarcity in economics?
Insufficient resources to meet all desires and needs
Study Notes
Economic Growth and Distribution
- A society decides on the distribution of goods and services among its members who need them most, considering the immediate beneficiaries.
- For example, during the COVID-19 pandemic, the society should prioritize producing masks and PPEs for frontliners.
Scarcity and Applied Economics
- Applied Economics seeks to solve the problem of scarcity, where human wants for goods and services exceed the available supply.
- Division of labor occurs when people specialize in what they produce and use their income to purchase what they need or want.
Economic Problems
- Consumers have a finite amount of money to spend, and they must choose how to allocate it.
- Issues in production include:
- Inadequate land and natural resources
- Polluted areas
- Overcrowded spaces
- Unskilled workforce
- Mismatch of jobs
- Low-quality equipment/machines
- Insufficient funds/capital
- Inadequate training of entrepreneurs
- Limited opportunity
- Scarcity of great ideas with many competitors
Resource Allocation
- Resources can have multiple uses (e.g., a plot of land can be used to plant coffee or build a factory).
- One resource can partially replace another in production (e.g., replacing manual labor with technology).
- Firms must make wise decisions on what goods/services to produce and in what quantity to meet the society's immediate needs.
Production Decisions
- The production of goods/services requires effective methods and processes.
- Production requires labor and capital investment.
- The society must decide on the type and quantity of goods/services to produce to meet the immediate needs.
Factors of Production
Land
- Land provides natural resources available to create supply.
- Land can be a non-renewable resource (e.g., oil, gold) or a renewable resource (e.g., timber).
Labor
- Labor is the work done by people, involving education, skills, and motivation.
- Productivity measures how much each hour of worker time produces in output.
Capital
- Capital or capital goods are man-made objects used in production (e.g., machinery, equipment, chemicals).
- Examples of capital goods include industrial and commercial buildings and a commercial aircraft.
Entrepreneurship
- Entrepreneurship develops an idea into a business by combining the other three factors of production.
- Entrepreneurs earn profits, and the most successful ones are innovative and risk-takers.
Characteristics of Resources
- Scarcity: insufficient resources to supply all the desires and needs of individuals.
Test your knowledge on how society makes decisions regarding the distribution of goods and services, laws for economic growth, and resource allocation for current consumption.
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