Chapter 1 definitions Flashcards
What is a need?
A good or service that is essential for living
What is a want?
A good or service which people would like to have, but which is not essential for living. Peoples wants are unlimited.
What is the basic economics problem?
There exist unlimited wants but limited recourses to produce the goods and services to satisfy those wants. This creates scarcity.
What are the factors of production?
Those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
What is scarcity?
The lack of sufficient products to fulfil the total wants of the population.
Name the factors of production?
- land
- labour
- capital
- enterprise
What is scarcity?
Is the lack of sufficient products to fulfil the total wants of the population.
What is opportunity cost?
The next best alternative given up by choosing another item.
What is specialisation?
Specialisation occurs when people and businesses concentrate on what they are best at.
What is division of labour?
When the production process is split up into different tasks and each worker preforms one of these tasks. It is a form of specialisation.
What is added value?
The difference between the selling price of a product and the cost of bought in materials and components.
Why is added value important?
Because sales revenue is greater than the cost of materials bought in by the businesses.
