Basic Economic Problem Flashcards
What is an economic agent
Any individual, firm,government or organisation that makes and economic decision
What is meant by scarcity
All of the world’s resources are limited. Economic agents can only obtain a limited amount at any time and therefore have to make choices about how they are used.
What does depletion mean
Using up of scare resources
What does degradation mean
Reducing the value of something
Why should we be concerned about depletion
Eventually there will be very little or nothing of some resources so we will have to look at other methods or resources
Why should be worried about degradation
Satisfaction levels would be decreased (value of house decreases by 24% when in walking distance of maccies)
What is a need
Basic necessities that you need to live
What is a want
Something that you like to had but you can live without
Why is it important to distinguish between needs and wants
So that you are able to priorities
What is an economic system
A way of dealing with an economic problem
What is a mixed economy
A mixture of a free market economy ( things are provided for my private individuals ) and a command economy ( things are provided by the government )
What is the purpose of economic activity
The production of goods and services to satisfy needs and wants ,to improve the standard of living.
What is meant by opportunity cost
The cost in terms of the alternative good which is foregone ( if we go to the cinema the opportunity cost is that we can’t go out for tea)
What is meant by a free good
A good for which there is no opportunity cost
What is an example of a free good and in what circumstance might it not be classed as a free good
-Fresh water and sea water
-air ( air tanks that divers use )
Which three key questions need to be addressed to attempt to solve the basic economic problem
- What? To produce
- How? To produce
- For whom? Should we produce it for
What are the four factors of production
Land labour capital and enterprise
What does land mean as a factor of production
It includes the natural resources on the earth, below the earth, in the sea , in the rivers and in the atmosphere. Some of these resources are renewable and others are non-renewable
What does labour mean as a factor of production
It is the human factor of production and each ores in in a workforce is a unit of labour. Labour can be valued in terms of its human capital and this can be improved by education and training.
What does capital mean as a factor of production
It’s the stock of manufactured tools and are used in production to produce other tools . ‘Social capital’ includes roads and other pieces of infrastructure.
What does enterprise/entrepreneurs mean as a factor of production
A unit of labour that takes risk. They also organise production and take risks using their own and the financial capital of other to produce goods and/or a service. They aim to make a profit.
What are the economic objectives of individuals
Utility/ satisfaction maximised
What are the economic objectives of firms
- they want to maximise profits
-growth
-social objectives
-out do rivals
What are the economic objectives of governments
-quality of life
-make people happy
-gain popularity
-maximise citizens welfare /well-being
