Intro & Basic Economic Problem Flashcards
What is the economic problem?
How do we allocate scarce resources to satisfy unlimited wants?
What are needs?
Needs are what are essential for survival (like food and water etc)
What are wants?
Wants are things we would like to own but are not essential (like mobile phones)
Resources are…
….finite
Our wants are…..
…..infinite
What are the four factors of production?
- Capital
- Enterprise
- Labour
- Land
What is “Capital”?
“Capital” is the money and equipment used to produce the product or service such as a sewing machine. As a reward, you would get interest.
What is “enterprise”?
“Enterprise” is having an idea of how to use the land, labour, and capital to make a profit. A CEO would have done this. As a reward, you would get profit.
What is “labour”?
“Labour” is the people who work in the business such as teachers, joiners, builders, or doctors. We measure qualifications and experience through human capital. For example, a tailor. As a reward, you would get a wage/salary.
What is “land”?
“Land” is the natural resources used in the production of a product such as water, oil, fields, or wood—for example, silk. As a reward, you would get rent.
What is opportunity cost?
Opportunity cost is the cost of giving up the next best alternative by making a choice.
What is worker specialization?
Refers to the idea when a worker concentrates on making a product or completing a set task.
What is town specialization?
Refers to the idea when a town or geographical area concentrates on making a product or completing a set task
What is country specialization?
Refers to the idea where a country concentrates on making a product or completing a set task.
What are the 3 sectors of production?
- Primary Sector
- Secondary Sector
- Tertiary Sector
What is the primary sector?
The primary sector involves companies specializing in extracting and producing raw materials from the natural environment. A few examples of companies involved in the primary sector are fishing, mining, farming, and oil production.
What is the secondary sector?
The secondary sector involved companies specializing in processing and manufacturing from the resources obtained by companies in the primary sector. A few examples of companies that are involved in the secondary sector are car manufacturers, food production, and building companies.
What is the tertiary sector?
The tertiary sector involves companies that provide services. These services are activities that are done by people or businesses for consumers. A few examples of companies that are involved in the tertiary sector would be hairdressers, banks, supermarkets, and cinemas.
What is globalisation?
Opening markets to trade with other countries; Economies rely on each other.
What is protectionism?
Taxes on foreign imports. So domestic goods are more competitive.
What is a market?
A market is a place where sellers and buyers can interact in order to exchange goods, services, and/or information.
What is a product market?
A product market is where goods and products are bought and sold.
What is a factor market?
A factor market is where the different factors of production, like capital, land, and labour, are bought and sold.
How do product and factor markets link together?
Product and factor markets link together as factor markets provide resources for the product markets. The efficiency affects one another.
What is the purpose of markets?
Markets are very important as they allow space where governments, businesses, and individuals can buy and sell their goods and services
What is a negative externality?
The cost incurred on a third-party not involved in a transaction.
What does renewable mean?
Resources which do not run out
What does Non-renewable mean?
Resources which do run out.
