Scarcity, Choice, Opportunity Flashcards
What are the 4 factors of production?
Capital-Physical capital, the total sum of buildings, vehicles and computers used by workers to produce an output
Enterprise-Managerial ability – just together the other factors
Land-Physical space For roads factories and all materials for example oil, copper, fertile soil
Labour-Also known as human capital. The workforce of an economy
What is infrastructure? Give two examples
Infrastructure is a crucial type of capital. Examples include:
- road and railway networks
- airports and docks
- telecommunications e.g. cables and satellites to enable web access
What are renewable resources?
Commodities such as solar energy, oxygen, biomass, fish stocks or forestry that are inexhaustible or replaceable over time, providing that the rate of extraction of the results is less than the natural rate at which the resource renews it self
What are non-renewable or finite resources?
Cannot be renewed. E. G. Crude oil, cold, natural gas and other items produced from fossil fuels where no mechanisms exist presently to replenish them.
What are semi renewable resources?
A resource that can be renewed due to human intervention for example planting trees.
What’s the difference between renewable goods and free goods?
Renewable good renew themselves but to take up factors such as land labour capital and enterprise
Free goods do not take up any factor inputs for example fresh air, and people can’t price it
What is an economic good?
- Something that can be priced or traded
- opportunity cost – the loss of other alternatives when one alternative is chosen
What are public and private goods?
Public goods – free for us all to use, nonexcludable, non-rivalry. For example street lighting
Private goods – excludable (not everyone can have/use it) for example a house. Rivalry – there is competition to have it
What is economic activity?
The activity of making, purchasing, or selling goods or services e.g: -Working for money – selling – buying – distributing goods – making something to then sell
What is the purpose of economic activity?
The central purpose is:
the production of goods and services to satisfy our ever-changing needs and wants
The basic economic problem is about scarcity and choice. Because of scarcity, choices have to be made by economic agents. What does this mean?
Economic agents make decisions that have an affect on an economy by buying, selling and producing. Every choice made involves a range of alternatives and agents make the choice that satisfies them the most
What are economic agents and what are they assumed to do?
- Economic agents include consumers, workers, producers/businesses, governments et cetera. They have to allocate their scarce resources between competing uses
- economic agents are assumed to act rationally – the choice is maximise their satisfaction from a decision
What are the different objectives of different economic agents – produces – workers – individual consumers – households – governments
Produces – produce the most amount of product for more sales and increased revenue plus market share. Or maximise environmental/ethical
Workers – maximise income/free time/working conditions
Individual consumers – maximise security or spending on wants
Households – security, maximum asset value, efficiency and resources et cetera water/electric usages
Governments - Maximise economic growth (GDP)and employment, low inflation, taxes, balance in input and output
What is utility maximises?
The concept that economic agents(Individuals and firms) seek to get to the highest satisfaction/profit from their economic decisions
What are the three maginal changes?
Marginal utility – how much satisfaction from one extra item consumed Total utility – satisfaction overall
Law of diminishing marginal utility – the decrease in satisfaction after the first purchase. Satisfaction reducing the more that it is consumed.
What is scarcity of resources?
It means that there isn’t enough resources whether it be money or raw materials to do everything, so a choice has to be made, meaning choosing more of one thing can only be achieved by giving up something else in exchange
Define opportunity cost
There is a constant opportunity cost involved in making economic decisions, and it means taking the best alternative because you cannot get everything. Opportunity cost as is the cost of any choice in terms of making the next best alternative foregone. It insures a more efficient allocation of resources
What is the importance of opportunity cost?
-It helps insure the most efficient allocation of resources
– it can be used by consumers to look at the profit forgone by not making an alternative product
– used by the government to look at lost value of society from policies chosen not to be implemented
– maximised profit
What are problems with the concept of opportunity cost?
– Not all opportunities may be known
– not all opportunities will be apparent due to lack of information
– some factors can be difficult to switch
– some factors do not have alternative uses
What is an economy? (Or economic system)
And economy is into related production/consumption activities
Structure the basic economic problem
Unlimited wants and unlimited resources equals Scarcity which equals choice was equals what to produce, how to produce, for whom to produce
However the decision-making and allocation of resources will differ depending on the type of economy
What is a free market economy?
– Resources are allocated based on supply and demand and the price mechanism
– the public is in control, this may neglect some of the population
– capitalist economies
What is a command economy?
– It is the government that decides how resources should be allocated in a command economy
– the government is in control
What is a mixed economy?
– When resources are both allocated based on supply and demand and the government make some decisions. It is usually a 60/40 or vice versa control percentage in mixed economies
-The UK is a mixed economy
What is positive economic’s?
Positive economic’s is the scientific object of study of the subject. They are statements that can be proven to be true or false. They can be about the future or current, as long as they will eventually be proven true of false
What is normative economic’s?
Normative economic’s statements that cannot be proven or disproved because they are like suggestions that you propose ideas. They are usually followed by positive economic statements, for example “pensions should be raised”– normative. “Pensions raised would mean… “ Which if pensions were raised could be proven ergo positive statement
Give examples of: – primary – secondary/manufacturing – tertiary/service Sectors
– Primary = agriculture, oil, extraction, mining, fishing
- Secondary = Food-processing, furniture making, steel production
- Tertiary = Transport, education, health, sports and leisure, distribution
What two sectors can the economy be split into?
The public sector – the state or government sector of an economy
The private sector – the part of the economy owned by private individuals, companies and charities
