Basics Of Economics Flashcards
What is Economics?
Economics is the study of how people manage resources.
What is micro economics?
Economics of individuals, businesses and markets
What is macro economics?
Economics of governments, countries and global economy
What is the Economic Problem?
We have unlimited wants and needs but limited resources.
Therefore decisions have to be made upon the allocation of resources we have.
What 3 questions are asked to fulfil the Economic Problem?
What should be produced?
How should it be produced?
Who should benefit from what is produced?
What is a want?
A want is something that will bring you benefit but you don’t have to have it
What is a need?
A need is something necessary - you have to have it for survival
What is the consumers want?
Higher standard of living
What is the producers want?
Profit maximisation
What are the governments wants?
Positive and stable economic growth
Low unemployment
Low inflation
Balanced balance of payments
What are the 4 factors of production?
Capital
Enterprise
Land
Labour
What is Capital?
Man-made resources used in production
What is Enterprise?
Skills and abilities of a person to make a business successful
What is Land?
Natural resources used in production
What is Labour?
Workforce
What is the reward if Capital?
Interest
What is the reward of Enterprise?
Profit
What is the reward of Land?
Rent
What is the reward of Labour?
Wages
How are economic decisions made?
Weighing up costs and benefits.
Money
Time
Resources
Environment
Etc
In economics costs and benefits are translated into a financial measure
What is Opportunity Cost?
“The next best alternative forgone”
To do something with the resources we have, we must give up our second choice
In this we discount any benefit from second option.
Economic benefit is what we get and beyond that.
Give example of opportunity cost?
The benefit of what you would have gained from second best good.
If deciding between a car and a phone and you choose the car, what is the opportunity cost?
The benefit you would have gotten from the phone
What are the 3 industry sectors?
Primary
Secondary
Tertiary
What is the Primary Industry Sector?
Business involved in extracting natural resources
E.g. fisherman
What is the Secondary Industry Sector?
Businesses involved in turning raw materials into a finished good (manufacturing)
E.g. factory worker
What is the Tertiary Industry Sector?
Businesses involved in providing a service rather than a good or sells a good in the retail sector
E.g. teacher
What is specialisation?
Specialisation (division of Labour) is when a production process is split into small tasks and each worker does one task over and over.
What are the benefits of specialisation?
Lower average costs
Make more profit
Get better at a particular job
Prices cheaper - more available
Quality higher
What are the drawbacks of Specialisation?
Lower motivation
Hard to cover for people ill or off
People lose diverse skills and find it hard to get different jobs
