LESSON 2 Flashcards
The inputs needed for the creation of a good or service. This include land, labor, entrepreneurship, and capital.
Factors of Production
The four factors of production
Land, labor, capital and entrepreneurship
Factors of production were originally identified by early political
economists such as
Adam Smith, David Ricardo, and Karl Marx.
A factor that is an essential component of most ventures, its importance can diminish or
increase based on industry.
Land
refers to the effort expended by an individual to bring a product or service to the
market.
Labor
refers to the work done by project managers and
developers in building the final product.
Labor
the primary driver of economic value.
Labor
Refers to the equipments/machines involved in producing a good or service.
Capital
secret sauce that combines all the other factors of production into
a product or service for the consumer market
Entrepreneurship
The so called special factor
Technology
The two basic activities undertaken in any economy:
Production and consumption
The 2 flows od Economic Activity
- Circular Flows
- Circular Flow of Economic Activity
Refers to the economic processes illustrating the operation of the entire
economy. It simply shows the flow of the resources or goods and services being transferred from one economic unit or sector to the other as well as the corresponding money
payments is made.
Circular Flows
the results in the interaction between household
and firms regarding production, consumption, employment, and income generation.
Circular Flow of Economic Activity
Refers to the measure of quantity at a point of time.
Stock
refers to the measure of movement of quantity over a period of time.
Flow
The process of producing goods and services involves
households and firms in circular flow.
Production process
According to the type of goods they produce, firms may be classified as:
Raw material producers
Intermediate goods producers
Final goods producers
When the money is spent by households for consumption and by firms for production, a _____ is created.
circular flow of income
Income takes two distinct circular flows:
Between household and firms
Between firms
The economy will be in _______ if the amount of money received by firms from households
is equal to the amount received by households in the firms.
Equilibrium
