Scarcity choice and opportunity cost Flashcards
1. understand what is meant by the basic economic problem. 2. *understand why and how choices are made by consumers, producers and the government.* 3. *apply the concept of opportunity cost to a PPC.* 4. *use a PPC to show unemployed resources, using resources fully, obtainable and unobtainable points of production.* 5. describe the possible causes of positive or negative economic growth and use a PPC to show.
What is the basic economic problem?
There are finite resources compared to infinite human wants, so choices have to be made about how to allocate these resources. (scarcity)
What is opportunity cost?
The next best alternative that is sacrificed/forgone in order to satisfy the other.
What are the 3 key decisions to be made in the scarcity problem?
- What to produce (supplies)
- How to produce (production methods)
- For whom to produce (distribution to population)
Who are the economic agents?
- individuals/consumers
- producers
- the government
Define wants
peoples desire for goods and services
Define needs
basic requirements for human survival
What are the 4 factors of production?
- land
- labor
- capital
- entrepreneurship
What do consumers aim to maximise?
benefit - consumers will make a rational decision and choose a course of action that will maximise their benefits
What do producers aim to maximise?
profit
What causes economic growth? (outward shift in the PPC)
- Education and Training - educated workers can be more efficient which makes productivity and output increase
- New technology - machines, robots and the internet can increase a countries productivity.
- Improved efficiency - new production methods produce more output.
- New resources - allows a country to produce more (ex. the USA raised its productive potential by oil fracking)
What causes the PPC to shift inwards?
- A countries natural resources runs out (e.g. oil)
- weather problems
- workers move overseas - less available and productive workers in the country
- war, natural disasters and epidemics
Define producer
A producer is someone who creates or supplies goods or services.
Define labour
A force of production that refers to the work people do to produce goods or services.
