What's covered
Key facts
Economic activity
The central purpose of economic activity is the production of goods and services to satisfy needs and wants.
Making choices
Because resources are scarce, individuals, firms and governments all have to make choices and trade-offs about how to use them.
The factors of production
Capital is the man-made resources used in production, such as machinery, tools, equipment and buildings.
Economic activity
The economic groups are interdependent: households buy goods and services from firms, firms pay households rewards for factors of production, and the government taxes and spends.
Making choices
Rational decision-makers weigh the benefit of an option against its cost, including the opportunity cost.
The factors of production
An economic resource is an input used to produce goods and services, and such resources are limited (scarce).
Economic activity
A need is something you must have in order to survive, such as clean water or food.
Making choices
Economic goods are scarce relative to demand and have an opportunity cost, while free goods such as air are abundant and have no opportunity cost in consumption.
The factors of production
Enterprise is the willingness and ability to organise the other factors and take the risks of production.
Economic activity
What people regard as needs and wants is not fixed: the AQA specification requires students to understand how needs and wants can change over time.
Practice questions with answers
A taste of the 26 questions in this topic, answers marked. Sign up to practise the full set with spaced repetition.
Which of these is a need rather than a want?
- •A foreign holiday
- •A games console
- ✓Clean drinking water
- •Designer trainers
What is the basic economic problem?
- •High taxes but low public spending
- •Rising prices but fixed wages
- •Too many firms chasing few customers
- ✓Unlimited wants but finite resources
A delivery company's fleet of vans is an example of which factor of production?
- ✓Capital
- •Enterprise
- •Labour
- •Land
What is the central purpose of economic activity?
- •Keeping the price of everything stable
- •Maximising the profits earned by private firms and banks
- ✓Producing goods and services to satisfy needs and wants
- •Raising as much tax revenue as possible
Mia revises instead of working a paid shift, which was her next best option. What is her opportunity cost?
- •The grade she hopes to achieve
- •The hours she spent revising
- •The money spent on textbooks
- ✓The pay she would have earned
Which of these counts as land in economics?
- •A car factory building
- •A fleet of delivery vans
- ✓A North Sea oil field
- •A team of engineers
Three minutes a day. Knowledge that sticks.
Practise all 26 Economic foundations questions with spaced repetition, so what you revise today is still there in the exam. Free to use, no card needed.