1.1.3 The Economic Problem Flashcards
What is the main purpose of economic activity
production of good/services to satisfy the ever-changing needs and wants of consumers
What is the basic economic model
it is about scarcity and choice
coming up with ways to meet infinite wants when faced with finite resources
With the basic economic model what 3 factors must society decided
- What good/services to produce
- How best to produce goods and services
Who is to receive goods and service
Because of what, all consumers, businesses and governments must make choices
Scarcity/finite resources
What has changed our perception of Scarcity and why
Emerging technology, like open access tot he internet and freely-available services
These services are free to use however have a opportunity cost involved
What are the 4 factors of production
Capital Enterprise Land Labour (CELL)
What is Capital, in terms of factor of production
goods made by people that are used to supply other products e.g. machines
What is Enterprise, in terms of factors of production
Entrepreneurs organise factors of production and also take risks when seeking market opportunities
What is a capital good
goods that are used to make consumer goods and services
E.g. plants and machinery
What is automation
production technique that uses capital machinery/technology to replace or enhance human labour
What is replacing labour known as
capital-labour substitution
e.g. robots is amazon warehouses
What are non-renewable resources
finite is supply
no mechanisms exits to replenish them at a rate faster than consumption
Rate of extraction depends in part on current market price
What are renewable resources
replaced if the rate of extraction is less than natural rate which resources renews
e.g. solar and tidal power
Opportunity cost
describe unavoidable trade-offs in the presence of scarcity
Cost of the alternative that is given up/ foregone, when a choice is made
Examples of opportunity costs
- Work/leisure choices
- Government spending priorities
- Investing today for consumption tomorrow
- Making sue of scarce farming land
