Factors of Production and PPF Flashcards
What is the definition of inputs?
Items that are used to produce goods and services in an economy
What are factors of production?
the inputs available to supply goods and services in an economy.
What are the four factors of production?
Land, Labour, Enterprise and Capital
As a factor of production, what does land entail of?
Natural resources available for production
As a factor of production, what does enterprise entail of?
Entrepreneurs organising factors of production and taking risks
As a factor of production, what does labour entail of?
The human input into the production process
As a factor of production, what does capital entail of?
Goods used in the supply of other products e,g tech
What are factor rewards?
The incomes that flow to each of the main factors of production when they are brought into productive use
What is the definition of a capital good?
Goods that used to make consumer goods and services
What is the definition of consumer goods and services
Goods and services which satisfy our needs and wants directly
What is the definition of consumer durables?
Products that provide a steady flow of satisfaction / utility over their working life
What is the definition of consumer non-durables?
Products that are used up in the act of consumption
What are consumer services?
a non-tangible good that is consumed (i.e. not physical)
What is the fundamental economic problem?
We have unlimited wants but only finite resources available to fulfil those wants
What does the fundamental economic problem force economic agents to do?
To make choices and allocate scarce resources between competing uses
What is opportunity cost?
The benefits lost from the next best alternative from a choice
What does a PPF show?
alternative combinations of two goods or services attainable when all resources are fully and efficiently employed
What type of substitute are land, labour and capital?
Imperfect substitute
Why is the PPF graph drawn concave to the origin?
As more resources are allocated to Good X the extra output gets smaller
Which law explains why the PPF is concave to the origin and how does it do this?
The law of diminishing marginal returns because not all factor inputs are equally suited to producing items leading to lower productivity
What does marginal mean?
An additional unit
How are “marginal units” used in economics?
To measure the impact of each marginal unit and how it influences the overall picture
What is the definition of productive capacity?
The maximum amount of output that can be produced by a nation or country
What are two causes of an inward shift of a PPF.
Damaging effects of a natural disaster
Destruction caused by civil war or conflicts
Large scale net outward labour migration
A trend decline in productivity inputs
Give 2 causes of an outward shift of a PPF.
Increase in the stock of capital and labour supplies, higher productivity, innovation and invention of new products and resources
What occurs during an economic recovery?
Aggregate demand will be rising. This leads to an increase in real national output and a fall in the amount of spare capacity
