1.1.3/1.1.4 the economic problem questions Flashcards
what is the economic problem
the problem of scarcity - where there are unlimited wants and finite resources
so CHOICES MUST BE MADE
what must each society decide
- what goods and services to produce
- how best to produce the goods and services
- who is to receive the goods and services
what are the main factors of production
CELL
- capital
-enterprise
- labour
-land
what is land
the stock of natural resources available for production- known as nature capital
what is labour
the quantity and quality of human input available for the production processes
what is capital
man made goods used to supply other products such as drones ,factories hardware and software
what is enterprise
entrepreneurs organise inputs and take risks when seeking to exploit market opportunities
what is automation
a production technique that uses capital machinery and harnesses new technologies to replace or enhance human labour. replacing labour is known as capital labour substitution
what are non renewable resources
the finite in supply
3 examples of non renewable resources
crude oil , coal and natural gas
what are renewable resources
they are replaceable if he rate of extraction is less than the natural rate at which resources renews
give 3 examples of non renewable resources
solar energy , tidal power and biomass
define opportunity cost
the cost of a choice measured by the next best alternative forgone
what does PPF stand for
production possibility frontiers
what does a PPF show
maximum potential output combinations of two good or services that an economy can achieved when all its resources are fully efficient and employed
why do we draw PPFs as a concave to the origion
when we move down along the PPF as more resources are allocated to good Y , then the extra output created gets smaller this is because of the law of diminishing marginal returns
what is the law of diminishing marginal returns
it occurs because not all factor inputs such as (CELL) are equally suited to producing different goods leading to lower productivity
what is the pareto efficiency
where will it lie on the PPFs curve
a pareto efficiency outcome is an action that harms no one and helps at least one person
it will occur on points that lie on the PPFs
what does a pareto improvement mean
the output of both products can increase
why does the PPF curve shift outwards
an improvement in the technology available to produce capital goods and if workers have been skilled through training will cause the curve to shift outwards
what are the causes of an outward shift in the PPFs
- higher productivity
- better management of factor inputs
- increase in the stock of capital and labour supply
4.innovation and invention of new products and resources - discovery of new natural resources(land)
reasons why a PPF may shift inwards
- affects of natural disasters such as tsunamis , earthquakes and floods
- the destruction caused by war
- large scale migration of people out of a country perhaps where there is high unemployment or depression.
4.a long term fall in the productivity of labour perhaps due to a decline in the quality of machinery
what is resource depletion
decline in total stock of resources available
what is resource depreciation
this is when the efficiency of resources diminishes with age and with repeated use during production
