Definitions Flashcards
Factor of production
- Resource inputs
- Available for use in an economy
- For production of goods and services
Goods vs services
- Goods are Tangible products
- Services are intangible products
Land
natural resources in an economy
Labour
The quantity and quality of human resources
Capital
Man made aids to production
Entrepreneurship
Willingness of an entrepreneur to
- Take risks
- Organise production
Factor endowment
- the stock of factors of production
Production
the output of goods and services
Want
anything you would like
- Irrespective of whether you have the resources and ability to purchase it
Scarcity
Situation where is there are
- Insufficient resources
- To meet all wants
Choice
The selection of appropriate alternatives
Opportunity cost
The next best alternative foregone.
Specialisation
- The concentration by a worker, firms, region or whole economy
- On the production of a narrow range of goods and services
Exchange
the process by which goods and services are traded.
Benefits of specialisation
- More output
- More choice
- Export led growth/higher income/productive efficiency
- Higher standard of living by moving away from subsistence
Risks of specialisation
- Unsustainable growth and depletion of resources
- Deindustrialisation and job losses
- Risks of a narrow income source
- Natural disasters destroying a year’s output
- Changing tastes and fashions - Interdependence and so Geopolitics, any unplanned shocks to the system likely to be felt in many other countries .e.g. Asian Tsunami, 9/11.
Division of labour
- Specialisation of labour,
- Where the production process is broken down into simpler separate tasks
Productivity
output or (production of a good or service), per worker , (per unit time)
Economic system
The way in which PRODUCTION IS ORGANISED in a country or countries
Market economy
an economic system whereby resources are allocated through market forces of supply and demand
Price system
A method of allocating resources by the free movement of prices
Command economy
- An economy system whereby most resources are state owned
- And resources are allocated centrally
Mixed economy
An economic system
- Where resources are allocated by
- A mixture of market and
- Direct public sector involvement
- Ownership of resources mainly private, but there is some public ownership.
Privatisation
The transfer of resources from public ownership to the private sector.
Production possibility curve
- This shows the maximum quantities of different combinations of goods which can be produced
- Given current resources
- Given the current state of technology.
Developing economy
An economy with a relatively low level of income per head.
Developed economy
An economy with a high level of income per head.
Tradeoff
the calculation involved in deciding on whether to give up one good for another
Give three examples of tradeoffs
Overtime and free-time
Capital investment and consumption
Production of two goods with a limited productive capacity.
Factors which cause outward shift in PPF
- Improved quantity and quality of factors available
2. Technological advances which raise productivity.
Economic growth
change in the productive potential of an economy
Productive potential
Maximum output which an economy is capable of producing.
Productive efficiency
where the average cost of production is minimised
