basic ecomomic problem Flashcards
what is the basic economic problem ?
the basic economic problem is that we have unlimited wants but limited resources (sources)
name three economic agents ?
consumers - to seek utility
firms/producers - maximising profit
government - to maximise walfare and stablity
what is a free market ? and some characteristics ?
the free market is an economic system controlled by supply and demand , that decide the allocation of resources
characteristics:
-free enterprise
- little government intervention
-society competes for employment and salary
what is market force?
market force is when supply and demand work together . when they work together this is called market mechanisim
what are free goods?
free goods are known as non scarce resources e.g oxygen
name the factors of production ?
CELL
- capital(buildings, factory, machinery )
- enterprise( the risk taker who organises the CELL for profit)
- land ( soil,air,rain)
- labour(workers)
what are the rewards of factors of production ?
- capital - interest
- enterprise = profit, is the reward for the entrepreneur
- land - rent, is the rewards if you rent it out
- labour - wages is the reward as you get paid for your service
what are positive statements ? and normative statements?
positive statements are objective statements that can be tested or amended by referring to available evidence
normative statement - normative statements are subjective as the carry value statements about what ought to be
what is the ‘invisible hand’? and what philiopher made this theory ?
The invisible hand is that the market should self regulate itself and that the government shouldnt get involved.
as if they do it will become an inefficient allocation of resources . - Adam smith
What is a free good?
what is an economic good ?
A free good is a good that is available with zero opportunity cost
An economic good is a good that is produced using limited resources
