SACE Year 11 Economics practice exams with worked answers

Economics studies choices about scarce resources and their effects on wellbeing. People have many wants, including food, shelter, education, leisure and entertainment. Wants can expand when incomes, technology or expectations change. Resources available to satisfy them are limited at a particular time. Land includes natural resources; labour is human effort; capital includes produced equipment; enterprise organises production and bears uncertainty. Money can help someone purchase resources, but printing money does not automatically create additional nurses, water or machinery.

Relative scarcity means that available resources cannot satisfy all competing wants. It does not mean a resource is completely absent. A town can have a working sports ground yet face scarcity when several teams want to use it at the same time. Absolute absence means none is available in the relevant setting. The distinction matters because economists investigate allocation even where positive quantities exist.

A free service can still be scarce: patients spend time waiting, and medical staff cannot treat everyone simultaneously.

Allocation is the assignment of resources among alternative uses. Families allocate time, businesses allocate workers, and governments allocate tax revenue. Prices, queues, ballots, eligibility rules and administrative decisions can all influence who receives something. Each method has consequences for access and incentives. A price may discourage lower income users; a queue may favour people with flexible time. Explain the chosen rule rather than assuming allocation always occurs through prices.

Efficiency concerns how effectively scarce resources support desired outcomes. Productive efficiency means obtaining the maximum feasible output from given inputs, or using the fewest inputs for a specified output and quality. Allocative efficiency concerns whether the mix of outputs reflects valued uses. Producing unwanted goods without waste does not establish that the allocation is desirable. Fairness is also a separate consideration: efficient resource use need not distribute benefits equally.