Economic Problem Flashcards
opportunity cost
cost of the next best alt forgone
Agents objs assumptions
• Rational C
- maximise utility by making right choice of spending limited income
• Rational p
- maximise profits by producing g/s desired by C at lowest cost
• GOV
Increase econ & social welfare of citizens
Basic econ problem
scarce resources to satisfy unlimited wants
Economic decisions (3)
work out
- What to produce
- How to produce
- Where production takes place
→ Prob every economy has
Econ Agents
Purpose of econ activity to satisfy ever-changing needs & wants
SO
- EA make choices → range of alt so benefits considered by choosing
- Resources allocated by competing use
Total Revenue formula
QXP
Profit formula
TR-TC
C durables
Gs providing flow of Utility in working life
C non-durables
Gs used up in consumption
free good
- NO oppo cost when used
capital gs
Econ resources eg factories & hospitals used to transform working capital into g/s
ppf
All combinations of 2 g/s when all resources are fully & efficiently employed
Human capital
value of productive potential of individ/workers, make up of Skill/ed training → represent valve of future earnings & production
FoP& FI
• Land → Rent
eg natural resources
• labour → wages
eg workforce
• Capital → Interest
eg stock of manufacturing
• Enterprise → Profit
eg seeking profit opportunities
Non-Renewable resources
Resources exploited but not replaced
Renewable
Resources economically exploited which can renew itself
sustainable resources
resources economically exploited that can’t run out
Non-sustainable resources
Resources economically exploited & stock decrease over time
