1.1 : PPF, OP COST, SPECIALISATION, ECON SYSTEMS Flashcards
Scarcity
Infinite wants and needs but only finite resources to produce
Opportunity Cost
The cost of the next best alternative that you forgo
Factors of Production
Resources/input needed to make good and services
FOP: Land
They are natural resources that are classified as renewable and non renewable
FOP: Labour
Human efforts that are either skilled or non skilled which require mental or physical effort
FOP: Capital
Man made resources used to help produce good or services.
FOP: Enterprise
The person that undertakes the idea and risk to sell products, usually manages the other 3 FOP.
Consumer Goods
Used directly for consumer satisfaction and consumption
Capital Goods
Goods that are used in producing other goods, increase the production capability of a firm/country.
Free Goods
Goods that do not incur opportunity cost because they are abundant in nature.
Eg: air, sunlight, wind, websites
Economics Goods
Goods that incur opportunity cost in their production. They are rivalrous in consumption and excludable in nature. Most goods fall under this including Capital and Consumer Goods.
Production Possibility Curve (PPC)
It is a curve that shows the max combination of 2 goods that a country can produce, with all resources being fully and efficiently utilised holding technology constant.
Economic Growth
Increase in the production of goods and services over a specific duration of time.
Economic Inefficiency
When an economy is operating below its potential (PPC) , resources are yet to be fully and efficiently utilised.
Specialisation
When individuals, firms areas or countries focus in the production of a particular good or service.
Division of Labour
It is when a completed task is broken down into many smaller parts, each done repetitively by a group of workers or individual to increase productivity.
Positive Statement
Factual and can be tested or verified. Either right or wrong.
Normative statement
Subjective and contains value judgement. Can be both right and wrong, normally uses words like “should, ought to, unfair”.
Money
Anything that can be generally accepted to perform the function of a medium of exchange,
Free Market Economy
A free market economy is based on supply and demand where prices are set freely between seller and consumer (market forces), without intervention from the government.
Centrally Planned Economy / Command Economy
In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy.
Mixed Economy
Economic system in which resources and production are partially allocated by the state and the private sectors.
Other Definition:
An economy that has government intervention whilst letting the supplier and consumer forces determine the market equilibrium
