LS1 - The Economic Problem Flashcards
What is economics?
The study of the economy
What is an economy?
All the goods and services produced within an area
What is a renewable resource?
A resource which regenerates faster than it is being used
What is a non-renewable resource?
A resource which regenerates slower than it is being used
What are the 4 factors of production?
Capital, Land, Labour, Enterprise
What is Capital?
Machinery / tools which are used to make goods
What is Enterprise?
The willingness of people in a firm to take risks to try and make a profit
What is Land?
The natural resources utilised by a firm in production
What is Labour?
The production workforce that produces goods
Why is Enterprise risky?
Because success can lead to profit, but failure can lead to loss of money or even bankruptcy
What does scarce mean?
When something is insufficient in quantity
What is the economic problem?
How to use available scarce resources to to satisfy consumers’ infinite wants and needs
What 3 key questions for economists investigate in regards to the economic problem?
What to produce?
How to produce it?
Who to produce it for?
What is the consumption decision?
Deciding what type of goods and services should be prioritised for production
What is the production decision?
Deciding how to produce goods and services in the most efficient way
What is the distribution decision?
Deciding how to allocate the goods and services which the economy produced
What are economic agents?
Groups of people who participate in the economy
Name types of economic agents.
Producers, consumers, the government
What are producers?
A type of economic agent who produces goods and services
What is a firm?
Another term for a ‘business’
What are consumers?
People who buy goods and services produced by firms
What is the government’s role in the economy?
Setting rules that other economic agents must follow, as well as producing their own public goods and services
What are free goods?
Goods which are not scarce and do not have an opportunity cost
Why has the number of free goods recently begun decreasing?
Because of the expanding population and increase in production has lead to higher demand for products and more pollution destroying the environment
What is the difference between wants and needs?
Needs are basic resources which you require to live, and they are finite. Wants are what would like to have and they are infinite.
What is an economic good?
A resource which is scarce
What are the 2 types of Capital?
Fixed Capital
Circulating / Working Capital
What is Fixed Capital?
Fixed capital is used to transform working capital into products. They are not transformed into final products. Examples - factories, machinery, offices
What is Working / Circulating Capital?
Raw materials or semi-manufactured goods which move through the production process until they are sold to the consumer
What is human capital?
The value of the productive potential of a worker
What is the difference between goods and services?
Goods are tangible, services are intangible
What does tangible mean?
Something you can touch
What does intangible mean?
Something you cannot touch
