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Unit notes and practice questions

Grade 9 Economics unit 2: The Basic Economic Problems and Economic Systems

Everything here is for unit 2 of the Grade 9 Economics textbook: what the chapter covers, the short notes, practice questions with their answers, and the lesson video where one exists.

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5
Cards
10
Practice questions on unit 2
13–28
The textbook pages for unit 2

What unit 2 covers

  1. 1.The Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
  2. 2.Central Problems of Economies
  3. 3.Economic Systems

Short notes for unit 2

The cards filed under this chapter on the Grade 9 Economics page. Open one at a time.

Economic SystemOwnership of ResourcesAllocation Mechanism
Traditional economyFamily or tribeCustoms, traditions, and barter
Capitalist economyPrivate ownershipPrice mechanism, competition, and profit motive
Command economyState or collectiveCentral economic planning
Mixed economyPrivate and public sectorsMarket forces combined with government planning

When you use it

Use when comparing how different economic systems determine resource ownership and economic decisions.

Watch out

Private ownership is completely absent in a command economy, but it co-exists with public ownership in a mixed economy.

Drafted from Grade 9 Economics, pages 13-28, then checked twice before it went up

Opportunity Cost=∣ΔSacrificed OutputΔGained Output∣\text{Opportunity Cost} = \left| \frac{\Delta \text{Sacrificed Output}}{\Delta \text{Gained Output}} \right|
ΔSacrificed Output\Delta \text{Sacrificed Output}
Quantity of the good given upunitsunits
ΔGained Output\Delta \text{Gained Output}
Quantity of the additional good obtainedunitsunits

When you use it

Use when calculating the trade-off of producing more of one good in terms of the forgone good on the PPF.

Watch out

Opportunity cost is measured in physical units of the sacrificed good, not in money. Always take the absolute value.

Drafted from Grade 9 Economics, pages 13-28, then checked twice before it went up

PositionStatusEconomic Meaning
On the curveAttainable and efficientFull employment and optimal resource utilisation
Inside the curveAttainable but inefficientUnderutilised resources or unemployment
Outside the curveUnattainableBeyond current resources and technology capacity

When you use it

Use to interpret efficiency and output feasibility for any combination of goods on a PPF diagram.

Watch out

Points inside the curve can be produced, but they indicate idle resources or inefficient production.

Drafted from Grade 9 Economics, pages 13-28, then checked twice before it went up

When you use it

Use when distinguishing between the universal economic condition and a temporary market imbalance.

Watch out

Scarcity is permanent, universal, and occurs when resources are limited at zero price. Shortage is temporary and occurs only at the prevailing market price.

Drafted from Grade 9 Economics, pages 13-28, then checked twice before it went up

ProblemCore QuestionDecision Focus
Allocation of resourcesWhat to produce?Types and quantities of goods (capital vs consumption)
Choice of techniqueHow to produce?Labour-intensive vs capital-intensive production methods
Distribution of outputFor whom to produce?Distribution of goods among members of society

When you use it

Use when identifying the three fundamental questions every economy must answer due to resource scarcity.

Watch out

How to produce is strictly about the choice of production technique (labour vs capital), not about final distribution.

Drafted from Grade 9 Economics, pages 13-28, then checked twice before it went up

Practice questions on unit 2

10 multiple-choice questions written against this chapter, each with its answer and the reason. Try one before you open the answer.

Question 1

What is the fundamental economic problem that every society faces?

  1. A.A temporary shortage of money
  2. B.The scarcity of resources relative to unlimited human wants
  3. C.The rapid growth of the banking system
  4. D.Too much supply of consumer goods
Show the answer and why

Answer: B The scarcity of resources relative to unlimited human wants

Why

According to the textbook, the fundamental economic problem that any human society faces is the problem of scarcity, which is the imbalance between limited resources and unlimited human wants.

Question 2

What is the definition of opportunity cost?

  1. A.The total money paid for a product in the market
  2. B.The value of the next best alternative that must be sacrificed
  3. C.The government tax placed on imported goods
  4. D.The profit earned by a business firm
Show the answer and why

Answer: B The value of the next best alternative that must be sacrificed

Why

Opportunity cost is defined as the amount or value of the next best alternative that must be sacrificed (forgone) in order to obtain one more unit of a product.

Question 3

The basic economic question 'What goods and services are to be produced?' is also called the problem of:

  1. A.Allocation of resources
  2. B.Choice of technique
  3. C.Distribution of national product
  4. D.Central economic planning
Show the answer and why

Answer: A Allocation of resources

Why

The question 'What goods and services are to be produced?' is also called the problem of the allocation of resources because an economy must decide the types and quantities of goods to make.

Question 4

Which economic system relies mainly on customs, history, and barter instead of money?

  1. A.Capitalist economy
  2. B.Command economy
  3. C.Traditional economy
  4. D.Mixed economy
Show the answer and why

Answer: C Traditional economy

Why

A traditional economy relies on customs, history, and time-honored beliefs, and uses barter instead of money to exchange goods.

Question 5

How does the textbook distinguish between scarcity and shortage?

  1. A.Scarcity is a short-term issue, while shortage is endless.
  2. B.Shortage means resources are finite, while scarcity is solved by money.
  3. C.Scarcity is universal and endless, while shortage is a specific and short-term problem.
  4. D.There is no difference between scarcity and shortage in economics.
Show the answer and why

Answer: C Scarcity is universal and endless, while shortage is a specific and short-term problem.

Why

The textbook states that a shortage is a specific and short-term problem occurring at the prevailing price, while scarcity is a universal and endless problem.

Question 6

On a Production Possibilities Frontier (PPF), any point located inside the curve represents an output combination that is:

  1. A.Unattainable
  2. B.Attainable and efficient
  3. C.Attainable but inefficient
  4. D.Achieving full employment and economic growth
Show the answer and why

Answer: C Attainable but inefficient

Why

All points on the curve are attainable and efficient, while any point inside the curve is attainable but inefficient.

Question 7

A farmer in Gojjam chooses to produce teff using more labour relative to capital (machinery) per unit of output. Which production technique is the farmer using?

  1. A.Capital-intensive technique
  2. B.Labour-intensive technique
  3. C.Command technique
  4. D.Centralized technique
Show the answer and why

Answer: B Labour-intensive technique

Why

A labour-intensive technique involves using more labour relative to capital per unit of output.

Question 8

In a capitalist economy, producers make goods according to what buyers want. This principle is known as:

  1. A.Central planning
  2. B.Consumer sovereignty
  3. C.Collective ownership
  4. D.Asymmetric growth
Show the answer and why

Answer: B Consumer sovereignty

Why

Consumer sovereignty means consumers can buy goods that suit their tastes, and producers produce goods in accordance with consumer demand.

Question 9

A nation produces only food (in metric tons) and computers. At combination B, it produces 420 metric tons of food and 500 computers. At combination C, it produces 320 metric tons of food and 1000 computers. What is the opportunity cost of producing 1 additional computer when moving from B to C?

  1. A.0.2 metric tons of food
  2. B.100 metric tons of food
  3. C.5 metric tons of food
  4. D.500 metric tons of food
Show the answer and why

Answer: A 0.2 metric tons of food

Why

Moving from B to C, the nation gains 500 computers (1000 minus 500) and sacrifices 100 metric tons of food (420 minus 320). The opportunity cost per computer is 100 / 500 = 0.2 metric tons of food.

Question 10

Why is the Production Possibilities Frontier (PPF) concave to the origin?

  1. A.Because total resources in an economy are unlimited.
  2. B.Because government sets fixed prices for all commodities.
  3. C.Because resources are not completely adaptable to alternative uses, leading to increasing opportunity costs.
  4. D.Because technology constantly improves every month.
Show the answer and why

Answer: C Because resources are not completely adaptable to alternative uses, leading to increasing opportunity costs.

Why

The law of increasing opportunity cost states that opportunity costs increase as more of a good is produced because economic resources are not completely adaptable to alternative uses (specialization effect). This makes the PPF concave to the origin.

The app holds 12 questions on this unit, marked as you go. These are the first 10.

The textbook pages for unit 2

Unit 2 runs from page 13 to page 28 of the Ministry of Education edition.

Ministry of Education edition, English, 130 pages

Download the PDF

All Grade 9 Economics short notes

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