Economic methodology and the economic problem Flashcards
1
Q
What are the 4 factors of production
A
- Land
- Labour
- Capital
- Enterprise
2
Q
What is labour
A
- the workforce in an economy
- all have different skills, qualifications and experience
3
Q
What its human capital
A
- The value of a worker
4
Q
What is land
A
- Encompasses all natural resources used in production of goods and services
5
Q
What is capital
A
- as a factor of production, it means all man made aids used in production process
- NOT just Money
6
Q
What is enterprise (entrepreneur)
A
- Those who organise Land, Labour and capital to produce products that will be profitable
7
Q
What is ‘the fundamental economic problem’
A
- That there are finite resources but infinite wants, creating scarcity, and meaning choices have to be made
8
Q
What is opportunity cost
A
- the benefit lost of the next best alternative when making a choice
9
Q
What are trade-offs
A
- a range of alternatives that are given up (ie multiple opportunity costs at once)
10
Q
What to Production possibility diagrams show
A
Different features of fundamental economic problem
-resource allocation
-opportunity cost and trade offs
-unemployment of resources
-growth
11
Q
What is a PPC
A
- A curve on a production possibility diagram that shows different combinations of output for 2 products
12
Q
What does a PPC show
A
The problem of choosing how to use scarce resources
13
Q
What does curved PPC mean
A
4 factors of production (labour, land etc) are not perfectly mobile/interchangeable between different uses
14
Q
What does straight PPC mean
A
4 factors of production are completely mobile between different uses
15
Q
What does a PPC shift outwards mean
A
- Economic growth due to increase in factors of production- more output produced
