Basic Economic Problem + Factors of Production Flashcards
Scarecity
The situation where there are insufficient resources to meet all wants
The Economic Problem
As humans we have unlimited wants but scarce resources in relation to those wants
As a result of this, choices must be made
Economics
The study of how to allocate scarce resources in the most efficient way
Production
The transformation of FoP into outputs (goods and services) by firms in order to earn profit
Firms want to maximise profit
Consumption
The act of using goods and services to satisfy wants
This will normally involve purchasing goods and services
Consumers want to maximise utility (satisfaction)
Three questions faced by all societies
WHAT goods and services should be produced?
HOW should these goods and services be produced?
FOR WHOM should these goods and services be produced?
Factors of Production
The resource inputs that are available in an economy for the production of goods and services
Goods
Tangible products e.g. cars
Services
Intangible products e.g. banking
Entrepeneurs
Agents who:
Organise Resources - organise Land, Labour + Capital in the production of goods and services
Take risk - will buy FoP with own money to produce goods + services in the hope they will make profit but they could lose their money and go bankrupt
Factor Endowment
The stock of FoP
