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Economics > Basic Economic Problem > Flashcards

Basic Economic Problem Flashcards

1
Q

What are the basic needs for survival?

A
  • food
  • water
  • clothing
  • shelter
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2
Q

What is a want?

A

Something we would like to have that we currently do not

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3
Q

What is a need?

A

A need is complex as if it is not met then it makes like very difficult

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4
Q

Why are individuals, businesses and governments wants unlimited?

A
  • goods eventually wear out and need to be replaced
    • electronic appliances
  • new or improved products become available
    • windows 8 for computers
  • human nature that once one want is satisfied, they want more
    • innate greed
  • advertising creates new wants
    • downloading ringtones
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5
Q

What are some limited resources?

A
  • coal and oil will run out one day
  • there is a limited supply of workers
  • there is a limit of how much investment a firm can make
  • there is a shortage of talent to ‘alpha minds’(entrepreneurs)
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6
Q

What is the basic economic problem?

A
  • scarcity
  • this arises because human wants for goods and services are infinite but the resources required to produce them are finite
  • this is a relative concept as resources are not scare in themselves, that are scarce in relation to the demands placed upon them
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7
Q

How is scarcity a universal problem?

A
  • applies to all economies
  • no country in the world has enough resources to produce enough goods to completely satisfy all the wants of its people
  • scarcity will always exist and cannot be eliminated; it can only be reduced
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8
Q

What is shortage?

A
  • occurs when the demand for a good is greater than the supply of it
  • in a market economy, shortages usually don’t last long and will be cured by a rise in price and/or an increase in supply
  • demand is a want backed up by the ability to pay and is therefore limited by income
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9
Q

What is scarcity?

A
  • this is different because we emphasise unlimited wants (not demand) and how they are never fully satisfied
  • this makes scarcity a permanent situation
  • if there was no shortage there would still be scarcity because of all those consumers who want the product but cannot afford to pay
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10
Q

What is opportunity cost for an individual?

A

-the opportunity cost of choosing a product is the next item oh his/her scale of preference

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11
Q

What is opportunity cost for a producer?

A

-the opportunity cost of producing a good is the next most profitable product which could have beeen produced with the resources used

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12
Q

What is opportunity cost for a government?

A
  • the opportunity cost of providing a service is the nest best service which it could have provided with the resources used
  • an economy investing its resources in new capital goods sacrifices current production of consumer goods
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13
Q

What does ‘modern industrial economies are dynamic’ mean?

A

-they are in a continual state of change

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14
Q

What does changing consumer demands and production methods mean?

A

-some industries will be growing (electronics and finance) whilst other are declining (coal and shipbuilding)

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15
Q

Why do resources need to be mobile (able to change their location or their use)?

A

-resources which cannot change either their location or use run the risk of becoming unemployed

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16
Q

What is geographical economics?

A
  • factor or resource mobility is the speed and ease with which a resource can move from place to place
    • if someone moves from America to Scotland
17
Q

What is occupational economics?

A
  • factor or resource mobility is the speed and ease with which a resource can change use
    • if someone changes job from farming to another type of employment like teaching
18
Q

In what forms can efficiency come in?

A
  • technical
    • the maximum output from minimum inputs
  • economic
    • the most valued goods and services are produced and no one can be made better off by transferring resources
      • resources have to be used in the most technical efficient way before economic efficiency can happen
19
Q

The best use of resources is called economic efficiency. This happens:

A
  • when technical efficiency is achieved
    • products are produced at minimum unit cost
  • when allocative efficiency is achieved
    • used to produce those goods and services which consumers most want
  • when all resources are employed
20
Q

What can efficiency conflict with the aim of?

A

-equity and fairness

21
Q

What do most advanced economies base their production decisions on?

A
  • demand
  • the demands of a few rich people could be satisfied at the expense of the demands of a large number of poorer people
  • although the economy could be said to be efficient, it is not equitable (fair)
22
Q

What is efficiency concerned with?

A

-maximising satisfaction

23
Q

What is equity concerned with?

A

-social justice and fairness

24
Q

What are production possibility curves/frontiers (PCCs/PPFs)?

A

-shows the possible combinations of goods and/or services that can be produced by a business or country

25
Q

What types of goods does a PPC show?

A
  • capital goods
    • those which are produced in order to produce consumer goods
      • machinery and equipment
  • consumer goods
    • those which are produced by capital goods for final consumption
26
Q

What is the maximum output of a PPC called?

A

-potential output

27
Q

How are all points on the curve possible?

A

-if all existing resources are being used Ina technical efficient way

28
Q

What does it mean if the economy is producing at a point inside the curve?

A
  • it is producing less than it could

- this could be because some resources are unemployed or they are being used inefficiently

29
Q

Why are point outside the curve not possible?

A

-the economy does not have the productive capacity

30
Q

What does any point on the curve represent?

A
  • a technically efficient use of resources

- an economy still has to make the decision a kit what combination of goods to produce (opportunity cost)

31
Q

What can a PPC be used to show?

A

-the opportunity cost of producing a product

Economics (4 decks)

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