1.1 The Economic Problem Flashcards
What is the economic problem?
The co-existence of scarce resources and infinite wants which requires choices about what, how and for whom to produce in order to achieve an efficient allocation of scarce resources
What are economic goods?
Goods that are scarce with their use having an opportunity cost
What are free goods?
Goods that are not scarce and have zero opportunity cost
What is scarcity?
When wants are infinite but resources are finite
What are needs?
Resources, goods and services necessary to survive
What are wants?
Goods and services households would like to consume but are not essential
What are the factors of production?
Capital, Enterprise, Land, Labour
What is capital?
Durable man made aids to production
What is enterprise?
Organisation and risk-bearing activitiy
What is land?
All natural resources used in the production of goods and services
What is labour?
All human effort (mental and physical) used in the production of goods and services
What are the factors payments?
Interest, profit, rent, wages
What are the factors payments?
Interest, profit, rent, wages
