economics - economic foundations Flashcards
What is the basic economic problem?
People have unlimited wants and needs while resources are limited.
What is the purpose of economic activity?
The production of goods and services to satisfy the ever-changing needs of society.
What is a need?
A necessity that is needed to survive, something required.
What is a want?
Not a necessity but only desired.
What are the three economic decisions?
WHAT, HOW, WHO.
What does ‘WHAT’ refer to in economic decisions?
Which goods/services should be produced that are wanted or needed.
(eg. more corn or more cows for milk)
Example: more corn or more cows for milk.
What does ‘HOW’ refer to in economic decisions?
Methods used for production.
(eg. labour or machinery)
Example: labour or machinery.
What does ‘WHO’ refer to in economic decisions?
How goods/services are distributed so people can access and use them.
(eg. ensuring that poorer people still have access)
Example: ensuring that poorer people still have access.
What are the main economic groups?
Consumers, producers, and government.
Who are consumers?
Those who demand goods and services.
Who are producers?
Those who supply goods and services.
What is the role of the government in the economy?
An organization that decides who should benefit and how to distribute goods and services produced.
What are the factors of production?
Capital, enterprise, labour, and land.
What is capital in terms of production?
Capital goods used to produce other consumer goods/services in the future. Reward = interest.
What is enterprise in terms of production?
A specialized form of labour input, an individual who supplies goods/services. Reward = profit.
What is labour in terms of production?
Human input into production. Reward = wages.
What is land in terms of production?
Natural and physical resources, e.g., fertile farmland, climate for solar or wind energy. Reward = rent.
How can consumers influence production?
Production is influenced by consumer demand
If a product doesn’t generate sufficient demand to reward the entrepreneur with enough profit, it will not be produced.
Define opportunity cost.
The cost of any possible alternative when making a choice.
