1.1 (idk) Flashcards
goods
physical objects like break, mobile phones etc.
services
are intangible, such as haircuts, gardening, repairs,
resources
all the inputs used to produce goods and services.
incl machines, workers, factories etc. they are also called factors of production
factors of production(4 categories)
all resources used to produce goods and services. in economics, they are grouped into 4 categories: land, labour, capital and entrepreneurship
scarcity
When the available resources or factors of production are finite, while human wants and needs are infinite. There are not enough resources to produce everything that is necessary to satisfy human beings’ needs and wants.
wants
Goods and services that people would like to have but are not necessary for survival, such as TVs, computers and cars.
needs
Things that people must have for survival such as food, shelter and clothing.
land
This includes the land itself, everything that is under and above the land and everything that is found in and under the sea. Therefore, this category encompasses all natural resources, such as minerals, oil reserves, natural gas, forests, rivers and lakes.
labour
This is the human factor needed for production. It includes the physical and mental effort that people contribute to the production of goods and services. Examples include a construction worker,
capital
This is the physical capital stock used to produce goods and services. It includes all manufactured (human-made) resources, such as machines, factories, roads and tools. Physical capital is also referred to as capital goods or investment goods.
entrepreneurship
This is a special human skill, possessed by some people, involving the ability to develop new businesses by organising the other three factors of production – land, labour and capital – to produce goods and services, and taking the risks of success or failure of the business, as profit is not guaranteed and investment may be lost.
opportunity cost
Opportunity cost refers to the second best alternative. The opportunity cost of the government paying a subsidy to a profit-making firm is all the other uses for that money, such as health care or education.
‘next best alternative that is forgone when an economic decision is made
economic goods
Goods that are produced with scarce resources, and therefore have an opportunity cost and a price; for example, a computer or apples.
free goods
Goods that are not produced with scarce resources, do not have an opportunity cost, and therefore do not have a price; for example, air, sunlight and rainwater.
three basic economic questions
what to produce?
how to produce?
for whom to produce?
merit goods
Goods that are beneficial to the individual and society as a whole, and are usually under-provided in a free market.
necessity good
A good or service whose quantity demanded does not change much in response to a price change because consumers consider it essential.
economic systems
Ways in which societies answer the three basic economic questions of what to produce, how to produce and for whom to produce, to allocate their scarce resources, goods and services. They are also called rationing systems.
free market economy
A rationing system where all economic decisions are taken by consumers and producers through the price mechanism without government intervention, and resources are privately owned by people and firms.
centrally planned economy
A rationing system where all economic decisions are taken at the centre by the government. There is no private property; all resources are owned by the state. Also called ‘command economy’.
demerit goods
goods that have negative effects when consumed and cause negative externalities of consumption
