basic economic problems Flashcards
what are the three economic problems
-unlimited needs and wants
- limited recourses
-problems of scarcity
what are the three economic questions
-what to produce
-how to produce
-for whom to produce
what are the three types of economic plans
-centrally planned (communism)
-mixed (social democracy)
-free enterprise (capitalism)
what are the four agents
producers (maximise profit)
consumers (maximise satisfaction)
government (maximise social welfare)
workers (maximise money made)
what is total utility
the total satisfaction from a given level od consumption
what is margin utility
the change in satisfaction from consuming an extra unit
the more of a product or service is consumed
the amount of satisfaction gained diminishes
when supply goes down
the line shifts left
when supply goes up
the line shifts right
when demand goes up
the line shifts right
when demand goes down
the line shifts left
what happens to price when there is a surplus
price will decrease
what are the four types of elasticity
-price elasticity demand
-price elasticity supply
-income elasticity of demand
-cross elasticity
what is price elasticity of demand
the responsiveness of demand to change in price
what is the equation of PED
ped=%ΔQD/%ΔP ( %change in quantity demand / % change in price)
what is something if it is elastic
% change in price is greater than %change in price ( always greater than 1)
what is something if it is inelastic
% change in demand is less than % change in price ( always less than 1 )
what is cross elasticity of demand
the responsiveness of demand of one good in the prices of a related good
what are the four factors of production
-land
-labour
-capital
-enterprise
what are normal goods
-demand rises as income rises
what are inferior goods
-demand falls as income rises
what is a luxury good
(normal good) elastic with +2 value
what is price elasticity of supply
the responsiveness of supply to change price
what does ceteris paribus
all other things being equal
