Basic Economic Concepts

Question 0

Factors of Production

Answer 0

1. Land - all natural resources used in production
2. Labor - the physical and mental talents of individuals used in producing goods
3. Capital - all manufactured aids used i. Production (purchasing capital is called investment)
4. Entrepreneurial Ability - combines other FOP’s, makes Haines destinations that set course of business, innovator, risk bearer

Question 1

Basic Economic Problem

Answer 1

Scarcity -

We are a society with unlimited wants but limited resources. Therefore we have to choose. We have to make trade-offs.

Question 2

Key determinants of a nation’s productive capabilities

Answer 2

Where the point is on the PPC? Is it more towards capital goods or consumer

Consumer = present
Capital = future

Question 3

Production Possibilities Curve
Represents?
Concavity?
Shifting?
LRAS?

Answer 3

Represents:
Different combinations of goods/services am economy can produce at full employment assuming fixed resources and constant technology

Concavity:
Due to “law of increasing opportunity costs” as production of one good increases you sacrifice more to make another of that good

Shifting:
Advances in tech 
Resource amount changes 
Human capital
Change in amount of labour force

LRAS:
Same thing