Basic Economic Problem Flashcards
What is the basic economic economic problem?
There are unlimited wants but only scarce economic resources.
What are economic resources?
Factors of production
What are the 4 factors of production?
Capital
Enterprise
Land
Labour
What is capital?
Man-made aids to production- allow for greater production of goods and services to take place.
What is enterprise?
Entrepreneurship- people who are risk takers that innovate and produce goods and services to make a profit.
What is land?
Natural land and resources where goods can be produced ir take form.
What is labour?
Human resources- workers.
How do we allocate scarce resources to allocate as many resources as we can?
Ask 3 questions
What to produce?
How to produce?
Who to produce it for?
Who decides what to produce?
Businesses decide based upon consumer demand.
Who decides how to produce?
Businesses decide based on what is most cost-effective and productive.
Who decides who to produce for?
Those who have got enough income to afford goods and services in a market.
What is opportunity cost?
The cost of the next best alternative forgone when a choice is made.
Why is opportunity cost useful?
It helps to assess whether or not something was a good way to allocate resources or not.
What is the sole function of economic activity?
To satisfy needs and wants.
What are needs?
Goods that people cannot live without.
