Foundation of Economics Flashcards
What is an economy?
An area where goods and services are produced. They vary in size and are often referred to as regional, national, or international.
Who are economic agents?
The decision-makers in the economy. The three main economic agents are:
- Consumers
- Producers (Firms)
- Government
Define scarcity.
A situation where limited resources need to be allocated among unlimited wants.
Factors of production.
The resources used to produce goods and services, also known as inputs:
- Land
- Labour
- Capital
- Enterprise
Define land.
All natural resources (eg. wood, water, soil) available for production of goods or services.
Define labour.
Any human effort (physical or mental) used in the production of goods or services.
Define capital.
Man-made resources (eg. machinery, computer, vehicles) used in the production of goods or services.
Define entrepreneurship.
- The organizing and risk-taking factor of production using the three other factors of production to produce goods and services.
- Take risk by using their own money to buy the factors of production, produce the goods and services, and hopefully, make a profit.
What is factor endowment?
The quantity and quality of land, labour, capital and enterprise available for production in an economy.
What is production?
The process of converting factors of production into goods and services.
Define opportunity cost.
The forgone benefit (eg. time, energy, money) of the NEXT BEST alternative when resources are used for one purpose rather than another.
How are resources limited?
- Limited in physical quantity
2. Limited in use
Economics as a social science.
Because it studies people in society and how they interact with each other.
What is a capitalism market?
Markets are unrestricted by limited government interference where buys and sellers interact to supply the required demand.
What is a mixed market?
The government plays a role to enforce property rights and to regulate markets. Taxes are also added to provide goods and services.
