1.1.3 - The economic problem

Question 1

What is scarcity?

Answer 1

Where there are not enough resources relative to needs and wants.

Question 2

What is the basic economic problem?

Answer 2

resources are scarce but wants are infinite. A choice within the allocation process therefore needs to be made. Distinguished by 3 parts - what is to be produced? How is production organised? For whom is production for?

Question 3

What are renewable resources?

Answer 3

a resource of economic value that can be replenished or replaced on a level equal to consumption.

Question 4

What are non-renewable resources?

Answer 4

a resource is a resource of economic value that cannot be readily
replaced by natural means on a level equal to consumption.

Question 5

What is an opportunity cost?

Answer 5

the cost of one thing in terms of the next best option which has been given up.

Question 7

What are the 4 factors of production?

Answer 7

C = Capital- refers to all man-made resources that are used to produce goods and services in the future. Owners of capital receive interest on their land.
E= entreprise -a human resource that takes risks and seeks to make profit from organising the other factors of production.
L= land-raw materials. Includes anything that is extracted from land.
L=labour-human resources. Related to human capital - the economic value of a person’s skills.