Economics Flashcards
What is the Economic system?
An economic system is the framework that determines how resources are allocated and how goods and services are produced, distributed, and consumed within a society or country.
What is the Ecenomic problem of relative scarcity and the need for decision-making by all individuals, businesses and governments at local, state, national and international levels?
The economic problem arises from the limited availability of resources relative to unlimited wants and needs, necessitating efficient allocation decisions. It underscores the imperative for individuals, businesses, and governments at various levels to make informed decisions about resource allocation to address the competing demands of society.
What is scarcity and relative scarcity?
Scarcity is when wants are unlimited and resources are limited. Relative scarcity occurs when resources are limited in relation to the demand for them, leading to the need for prioritization and allocation decisions.
Give an example of relative scarcity.
Limited availability of clean drinking water in certain regions, due to the fact of pollution, unequal distribution and makes the need for decision-making to allocate resources efficiently.
What is opportunity cost?
Opportunity cost represents the benefits of opportunities sacrificed by choosing one option over another.
Recognise opportunity cost’s significance in decision-making, where benefits are subjectively measured against costs?
It’s significant in decision-making because it prompts individuals, businesses and governments to assess the trade-offs involved in choosing between alternatives. By comparing the benefits and costs of different options, decision-makers can allocate resources efficiently to maximize their overall welfare or profit. This subjective evaluation ensures that choices are made based on the perceived value gained relative to what is given up, leading to more informed and rational decision-making processes.
What are economic indicators and economic growth?
Economic indicators are statistics or data points used to assess the health and performance of an economy, including measures like GDP, unemployment rate, inflation rate etc.
Economic growth refers to the increase in a country’s production of goods and services over time, typically measured by the rise in its Gross Domestic Product (GDP).
What is consumer soverignty and Government intervention?
Consumer sovereignty is the principle that consumers, through their purchasing decisions, determine the types and quantities of goods and services produced by businesses, thereby exerting control over the market.
Government intervention refers to the actions taken by a government to influence or regulate economic activities within its jurisdiction, such as implementing policies, laws etc.
Classify the factors of production and link them to income (rent, wages, interest and profit).
Land: This includes natural resources such as land itself, minerals, water, and other raw materials used in production. Income derived from land is termed as rent.
Labour: Refers to the physical and mental effort exerted by individuals in the production process. The income earned by laborers for their work is called wages.
Capital: Represents man-made resources used in production, such as machinery, equipment, buildings, and technology. Income generated from capital is known as interest.
Enterprise: This factor involves the organization and risk-taking abilities of entrepreneurs who bring together other factors of production. The income received by entrepreneurs for their entrepreneurial activities is termed profit.
What is market mechanism (supply and demand to determine price)?
The market mechanism refers to the interplay between supply and demand in determining prices for G&S. When demand for a product increases higher than the supply, prices tend to rise, whereas if supply exceeds demand, prices typically fall.
What is the production possibility curve?
It shows the maximum output combinations of two goods or services that an economy can produce given its availability to resources and technology.
What is capitalism?
An economic system characterized by private ownership of the means of production, where individuals and businesses operate for profit in competitive markets, with minimal government intervention.
What are the different ecenomic systems?
Capitalism, socialism, and mixed economies, each characterized by distinct approaches to ownership, resource allocation, and government involvement in economic activities.
What is capitalist market economy?
A capitalist market economy is an economic system where private individuals and businesses own and control the factors of production, and economic decisions are primarily driven by market forces of supply and demand.
What is a mixed/mixed market economy?
A mixed market economy is an economic system that combines elements of both capitalism and socialism, where both private individuals and the government play a role in economic decision-making and resource allocation.
