Fundemental Economic Problem Flashcards
State what the fundamental economic problem is
The fact that individuals within an economy have infinite wants while there are scarce resources available to meet these wants
State what scarcity is
The state of being short in supply, especially relative to how much something is demanded
State what economic activity is
Any time someone provides a product or service in order to satisfy the need or want of themselves or others
State what opportunity cost is
The value of the next best option which is forgone when an economic decision is made
State what the labour FoP is
The manual labour a person does and is rewarded with wages
State what the land FoP is
The naturally occurring resources required to make something and is rewarded with rent
State what the capital FoP is
The man made products and tools that help produce a good and is rewarded with interest
State what the enterprise FoP is
The risks a corporation or person takes in a business and organise other FoPs and they are rewarded with profit
State what an economic good is
Products that people usually trade/buy and are limited
State what a free good is
Products that are abundant and usually not traded
State what a production possibility diagram is (PPF/PPC/PPD)
Diagram used to show the maximum quantity of two goods that a producer can produce in any combination over a period of time
State what productive efficiency is
A situation in which a producer or economy is making full use of the resources available. Producing more of one good or service must mean the other good or service gets produced less
State what the market is
Any place where goods and services are exchanged between buyers and sellers. Can be physical and online
State what diminishing marginal utility is
as the units of services and goods consumed increase the marginal utility of each new unit consumed will diminish/reduce in value
State what demand is
The quantity of a good or service that consumers are both willing and able to buy at a range of prices over a given period of time
State what Shift is
The movement of the entire demand curve on a diagram
State what Extension/Contraction is
The movement along a demand curve caused by price changes
State what substitute goods is
Goods which perform similar roles such that they can replace one another in use or consumption
What does TIGER stand for?
Trade Balance Inflation Growth (sustainable) Employment Redistribution of wealth
State what an economic agent is
An individual or company that influences an economy by producing, selling or buying goods and services or investing money
State what national income is
Total monetary value of the output of goods and services within an economy over a certain amount of time
State what real national income is
Total monetary value of the output of goods and services within an economy over a certain amount of time but adjusted to ignore inflation
State what an injection is
money entering the circular flow of income
State what withdrawal is
money leaving the circular flow of income
State what exports is
the value of goods leaving an economy to be sold abroad
State what imports is
the value of goods and services entering an economy from abroad
State what ceteris paribus is
other things equal
apart from the named things that have changed the rest remain unchanged
state what a finished good is
a good that will not be sold again as part of another good
state what a intermidiate good is
a good that is bought and used to make a finished good
How do you calculate real GDP?
you use the same prices or the goods and services from a previous year and add up all the goods and services produced from the year you want to measure
What are the causes for inflation?
Cost-push inflation = cost of producing goods increases so the companies increase prices of goods to compensate for this
Demand inlfation = When several people want a good or service the price increases as a result as the demand can ethier not keep up or the company wants to make more money. Can be caused by governments lowering taxes so therefore people have more money to spend on goods and services. Or lower interest rates on loans
Printing money - more money around in circulation for the same amount of goods and services, meaning more money is used to buy the goods and services as there is more of it around
How do you calculate inflation?
650 most commonly bought items are price checked every day by the Home Office and compared to the prices from last year
What is frictional unemployment?
When a worker loses their job and is looking for another one
what is seasonal unemployment?
um-employment due to certain industries only producing the goods and services during a certain time of the year
What is structural unemployment?
unemployment due to a long term change in that industry or market
What is cyclical unemployment?
unemployment due to a significant event like recessions
unemployment goes up and down
