1A Flashcards
What is the economic problem
There are unlimited wants but only limited resources.
What are the three economic questions
What? what goods and services should be produced.
How? How should resources be used to produce goods
For whom? How should these goods be allocated among the population.
What are the three economic agents
Consumers- Households and individual buyers
Firms-Produce the output of goods and make choices about what and how they produce.
Government- Makes choices about its expenditure in an economy and can also influence the economy through various tools such as taxation.
What are factors of production
Resources used in the production process.
What is a capital factor
Man made aids to production, e.g machinery, buildings and tech.
What is enterprise factor
Where an individual takes the risk and organises the other factors of production in the production process, main reward is profit.-entrepreneur and have a business idea.
What is labour factor of production
The human resource available for use as workers in the production process, resources is affected by the quantity and quality of human resources.
What is land factor of production
The natural resource that can be used for production in an economy. e.g oil, sea and land itself.
What is a renewable resource and a non
Natural resource that can be replenished, Natural resource that once used cannot be replenished such as coal and oil.
What is marginal analysis
An approach to economic decision making based on considering the additional benefits and costs of a change in behaviour.
what is ceteris paribus
All other factors remain constant
What is an economic model
A simplified representation of reality used to provide insight into economic decisions and events.
What are limitations of models
Many assumptions are made which could be wrong, can not predict un expected events.
What are positive statements
Statements that can be verified tested or rejected by referring to data.
What are normative statements
Statements that cannot be verified by data and that use value judgements.
What is opportunity costs
In decision making the value of the next best alternative forgone
What is a PPF
A curve showing the maximum combinations of 2 goods or services that can be produced in a given period with alternative resources.
What is any point inside the PPF
Resources are not being fully uitlised
What is any point outside the PPF
UN obtainable within the current level of resources
What is economic growth
An expansion in the productive capacity of the economy.
What is division of labour
Where the production process is broken down into stages and workers are allocated to a particular stage.
Ads and Dis of division of labour
Ads- Higher output, quicker to train workers, lower training costs, less waste, more efficient.
Dis- Less output due to boredom, quality trade off, less variety in jobs.
What is specialisation
Concentration on a single? Narrow range of goods and tasks. Resulting in workers becoming more skilled, due to repetition of task, resulting in lower cost for the firm. so more potential profit.
what is a market
Where buyers and sellers are bought together to trade goods and services.
What is a free market economy
An economy in which market forces are allowed to guide the allocation of resources and there is no state intervention. adv- Higher wages, lower taxes. dis- excessive power of firms, inequality
What is a command economy
An economy in which decisions and resources allocation are guided by the government. adv- low unemployment, aquality.
dis– lack of innovation.
