(1) Chapter 1 - The Economic Problem Flashcards
What is the basic economic problem?
Wants are infinite but resources are finite
What is a NEED?
Something that is essential for human survival. (Eg; food, clothing, warmth)
What is a WANT
Something that is desirable but not necessarily for human survival
What are the 4 FACTORS OF PRODUCTION?
- > Land
- > Labour
- > Capital
- > Enterprise
What are factors of production?
Inputs into the production process to create output
What is a FINITE RESOURCE?
A resource which is scarce and can run out as it is used
What is a RENEWABLE RESOURCE?
A resource, that with sustainable usage, can be renewed as it is being used
What is the fundamental economic problem?
Making the best allocations of scarce resources to improve and maximise human happiness and welfare
What is meant by OPPORTUNITY COST?
The cost of giving up the next best alternative
What is the PRODUCTION POSSIBILITY FRONTIER (PPF)?
A curve showing the various combination of two products that can be produced when all available resources are fully employed
What is ECONOMIC GROWTH?
The increase in the potential level of real output the economy can produce
What is FULL EMPLOYMENT?
When all who are able and willing to work are employed
What is UNEMPLOYMENT?
When not all of those who are willing and able to work are employed
What is PRODUCTIVE EFFICIENCY?
When the economy as a whole can not produce more of one good without producing less of another
What things can make the PPF shift?
- Increase in the stock of factor inputs
- Rise in efficiency
- Advances in technology
