basic economics Flashcards
the basic economic problem
humans have unlimited wants but limited resources to satisfy them , namely money and supply
the factors of production
land, labour, capital and enterprise
land as a FOP
included all naturally occurring resources; crops fish etc: factor payment is rent
labour as an fop
the work provided by people that allows products to be manufactured and services to be performed, payment factor is wages.
capital as an fop
The non human parts of the economy that facilitate production or service. e.g factory buildings, machinery. factor payment is interest.
enterprise as an fop
the work of the entrepreneur to bring together the other 3 FoPs to create a profitable firm. payment factor profit.
free goods vs economic goods
free goods dont command value in the market, economic goods do and have price.
economic agents
firms households and governments
role of households in the economy
maximise utility, provide demand and supply labour
role of firms in the economy
maximise profits, produce goods and services
role of governments in the economy
maximise welfare and economic stability, influence the economy to achieve these
how is it assumed economic agents will behave
rationally to maximise satisfaction. however poor planning, addiction, fraud and lack of perfect knowledge may dissuade this aim
positive statements vs normative statements
positive - can be proven or disproven
normative- opinion based
opportunity cost
the value of the alternative given up when the most satisfying choice is made
what type of analysis uses opportunity cost
marginal analysis, the extra one considered
what choices do businesses and consumers have to make to navigate the economic problem
what to produce, who to produce it for and how to produce it. consumers have to decide how much labour to supply and how to spend their income
