01 The Economic Problem Flashcards
Define ‘finite’
having an end or a limit
Define ‘infinite’
without limits
What is the ‘basic economic problem’
the allocation of a nation’s scarce resources between competing uses that represent infinite wants
What are scarce resources?
the amount of resources available when supply is limited
What three questions have to be asked to overcome the basic economic problem?
- What to produce?
- How to produce?
- For whom to produce?
Define ‘opportunity cost’
the value of the next best alternative given up when making a choice
Define ‘expenditure’
spending by a government
What are capital goods? Give an example.
goods purchased by firms and used to produce other goods or services eg. machinery, tools and equipment
What are consumer goods? Give an example.
goods purchased by households for consumption eg. food, cars and laptops
What is a production possibility curve (PPC)?
a line that shows the different combinations of two goods an economy can produce if all resources are used efficiently
What four factors can cause a PPC to shift outwards?
- new technology
- improved efficiency
- education and training
- discovering new resources
Define ‘economic growth’
the increase in the level of output by a nation
