Business Activity (Chapter 1). Flashcards
This deck consists of : Needs. Wants. The economic problem. Factors of production. Scarcity. Opportunity cost. Specialization Division of labor. Businesses. Added Value.
What is a need?
A need is a good or service essential for living.
What is a want?
A want is a good or service which people would like to have, but which is not essential for living.
People’s wants are unlimited.
What is an economic problem?
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.
The government decides to try to ‘solve’ problems by printing more bank notes, doubling everyone’s incomes. Why is this not good?
Printing more money does not produce more goods and services, it will just lead to inflation so more goods cannot be afforded.
Define factors of production.
Factors of production are those resources needed to produce goods or services.
There are four factors of production and they are in limited supply: Name them?
There are four factors of production and they are in limited supply: Land, labour, capital and enterprise.
There are four factors of production: Define land.
This term is used to cover all of the natural resources provided by nature.
Give some examples to natural resources provided by nature?
Fields and forests, oil, gas, metals and other mineral resources.
There are four factors of production: Define labour.
This is the number of people available to make products.
There are four factors of production: Define capital.
This is the finance, machinery and equipment needed for the manufacture of goods.
There are four factors of production: Define enterprise.
This is the skill and risk-taking ability of the person who brings the other resources or factors of production together to produce a good or service.
What is an entrepreneur?
An entrepreneur is an owner of a business.
State the word diagram for the real cause of the economic problem.
Unlimited wants + limited resources = scarcity.
Define opportunity cost.
Opportunity cost is the next best alternative given up by choosing another item.
For example, I have to choose between a holiday or a car and I choose the holiday, what is the opportunity cost?
If I choose the holiday, the car becomes the opportunity cost.