Revision ‘Know it’ questions

a. Define the basic economic problem.

b. Explain the basic economic problem in relation to oil.
c. Outline the term ‘ceteris paribus’.
d. Define the term ‘opportunity cost’.
e. Outline what a PPF demonstrates.
f. Explain why output can never be outside the PPF.
g. Explain the difference between capital and consumer goods.
h. Define specialisation.
i. Explain the term ‘division of labour’ with reference to Adam Smith
j. Outline how specialisation can occur.
k. List the four functions of money.
l. List and define the three types of economy.
m. Explain the role of the state in a mixed economy.
n. Define the term ‘demand’.
o. Define the term ‘effective demand’.
p. Explain why the demand curve is downwards sloping.
q. Draw a demand curve with a movement along explaining what causes this.
r. Draw the demand curve shifting left and right and demonstrating the impact on price.
s. Define the term ‘supply’.
t. Explain why the supply curve is upwards sloping.
u. Draw a supply curve with a movement along explaining what causes this.
v. Draw the supply curve shifting left and right demonstrating the impact on price.
w. Define Price Elasticity of Supply.
x. Write down the formula for PES.
y. Define price elasticity of demand.
z. Write down the formula and co-efficients for price elasticity and inelasticity of demand.
aa. Why does PED have to be a negative number for normal goods?
bb. Draw a demand and supply diagram and show the equilibrium price and output
i. Explain how market forces can eliminate excess demand and supply.
cc. Define the following in relation to the price mechanism
i. Signalling
ii. Incentive
iii. Rationing
dd. Define consumer surplus.
ee. Define producer surplus.
ff. Draw a demand and supply diagram and highlight the area of consumer and producer surplus.
gg. Explain why consumer and producer surplus occurs.