Nnture Of Economics Flashcards
Opportunity cost
Value of the next best alternative forgone
Scarcity
Insufficient a resources to meet everyone’s wants
Factors of production
Inputs used in the production of goods and services
Finite & can be classified into 4 types : land, labour, capital, enterprise
Renewable resource
One whose stock level can be maintained over a period of time
Non renewable resource
One whose stock level is decreased over time as it is consumed
Production possibility frontier
Shows maximum potential output for two goods / services that an economy can achieve when all it’s resources are fully and efficiently employed given the level of technology available
Causes of outward shift in production possibility frontier
Increase of quality / quantity of resources
Expansion of further and higher education and government training schemes
Increase in investment and development of new technology
Specialisation
When individual, firm or country concentrates on the production of a limited range of goods and services
Led to increases in productivity and living standards across world
However when demand for a good falls the country may face unemployment + country specialising in production & export of minerals may face problems of resource depletion
Division of labour
One form of specialisation where individuals concentrate on the productions of a particular good / service
The production process is broken up into series of tasks , conducted by different workers
Advantages of division of labour
1) person who spends time on one task quickly becomes highly skilled
2) no time is wasted in moving from one job to another
3) capital equipment can be used continuously in production
4) less time equites to train workers for specific tasks
5) more choice of jobs and so workers can specialise in tasks they are most suited for
Disadvantages of division of labour
1) repetition creates monotony and boredom - could be a high turnover of staff leading to increased recruitment and selection costs
2) breaking down production into different tasks makes it easier to replace skilled workers with machines leading to structural unemployment
3) specialisation creates interdependence in production- if one group of workers goes on strike it could halt production across whole industry
Free market economy
All resources allocated by price mechanism
No gov intervention
Mixed economy
Some resources allocated by price mechanism and some by gov
Centrally planned economy
All resources allocated by gov
No price mechanism
Positive statement
Can be tested as true of false by referring to facts
