Chapter 15 - Intro to Economics Flashcards
What are the factors of production?
These are the elements necessary to produce goods and services
- Land
- Labour
- Capital
- Enterprise
Explain the factor of production land
Refers to all natural resources available in a country that can be used to produce goods and services e.g agricultural land, seas, lakes, rivers, mines, forests
Explain the factor of production labour
Refers to people available in a country to help produce goods and services and to the qualifications and skills they have
Explain the factor of production capital
Refers to all man made things available to help produce goods and services e.g machinery, vehicles, buildings, equipment
Explain the factor of production enterprise
The act of bringing together land, labour and capital to set up a business to produce a product or service at a profit
Show how each factor of production can be a source of income to the person who provides it
💩 Land yields rent
💩 Labour receives wages
💩 Capital earns interest
💩 Enterprise makes a profit (or loss)
What is economic system?
The way a country uses the factors of production to produce goods and services
What are the three main types of economic systems?
⚡️ Centrally planned economy
⚡️ Free enterprise economy
⚡️ Mixed economy
Explain a centrally planned economy and give an example
The government makes all the decisions about the production of goods and services e.g Cuba and Iran
Explain a free enterprise economy and give an example
Citizens are free to make all the decisions about the production of goods and services (within the law) e.g USA
Explain a mixed economy and give an example
A combination of centrally controlled economy and free enterprise economy e.g Ireland
What is economics?
The study of how people, businesses and governments with a limited income make decisions about what they spend their money on
What is economic growth?
Refers to the change in quantity of goods and services produced in a country from one year to the next
What is the total amount of goods and services produced in a year referred to as?
Gross National Product (GNP)
How do you calculate economic growth?
Change in value of goods 100
————————————- X ——
Value of goods in year 1 1
What are the benefits of economic growth?
- New jobs
- People enjoy a higher standard of living
- More money available
How do you achieve positive economic growth?
- Keep inflation low
- Interest rates are low
- Wage increase and other costs are kept low
- Government budgets well and reduces their borrowing
What is inflation?
A general rise in the cost of living from one period to another (increase in price)
How do you calculate inflation?
Increase in the cost of living 100
—————————————- X ——
Cost of living in year 1 1
What are the causes of inflation?
- Increase in cost of producing goods
- Supply and demand
- Price of oil has increased
What are the benefits of low inflation?
►People have more money to spend ►New jobs created ►Irish firms become more profitable ►Government receives more money from taxation ►Irish goods will be cheaper to produce
What are the dangers of high inflation?
◄Irish goods will be more expensive to produce
◄Jobs lost
What is the CPI?
The Consumer Price Index→It would be too difficult to look at the price of every product and service available on sale in Ireland to calculate inflation. Therefore a selection of goods is selected and this selection is called the Consumer Price Index
