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Eco- Mixed Revision > Section 1- The basic economic problem > Flashcards

Section 1- The basic economic problem Flashcards

1
Q

Define Resources

A

Factors used to produce goods & services

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2
Q

Define Free good

A

A product which does not require resources to produce it and therefore has no opportunity cost

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3
Q

Define Opportunity Cost

A

The best alternative forgone

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4
Q

Define Economic Problem

A

Unlimited wants exceeding finite resources

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5
Q

Define Scarcity

A

A situation where there is not enough resources to satisfy everyone’s wants

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6
Q

Explain why wind coming in from the sea is a free good (4)

A
  • Does not need resources to be produced (already available)

- No opportunity cost

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7
Q

Define Economic good

A

A product which requires resources to produce it and therefore has an opportunity cost

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8
Q

An example of the economic problem in the context of:

  1. Consumers
  2. Workers
  3. Government
A
  1. One does not have the income to buy every car
  2. One can not do every job (supply of time)
  3. Spending the tax revenue (Eg. Building schools, hospitals)
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9
Q

Identify the 4 factors of production

A
  1. Land
  2. Labour
  3. Capital
  4. Enterprise
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10
Q

Land

A

The gifts of nature available for production

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11
Q

Labour

A

The human effort used in producing goods and services

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12
Q

Capital/ Producer goods

A

Human-made goods used in production

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13
Q

Human Capital

A

The education, training and experience the workers have gained

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14
Q

Capital goods

A

Not wanted for their own sake, but for what they produce

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15
Q

Consumer goods

A

Goods and services purchased by households for their own satisfaction

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16
Q

Enterprise

A

The willingness and ability to bear uncertain risks and make key decisions in a business

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17
Q

Occupationally mobile

Geographically immobile

A

Capable of changing use

Incapable of moving from one location to another location

18
Q

Causes for labour being geographically immobile

A
  • High prices and unavailability of housing
  • Family ties
  • Differences in educational systems
  • Lack of information (unaware of job opportunities)
  • Restrictions on movement ( work visa)
19
Q

Causes of labour being occupationally immobile

A
  • Lack of information about vacancies in other types of jobs

- Lack of appropriate skills and qualifications

20
Q

Define mobility of enterprise

A

The ability to change where enterprise is used or in which occupation

21
Q

Most mobile FOP? Why?

A

Enterprise-
The mobility of enterprises depends on the mobility of entrepreneurs
The skills involved in being an entrepreneur can be applied in every industry.
Someone who has been successful in starting up and running a business in one country is likely to be successful in another country also

22
Q

Quantity of labour is influenced by which 2 factors?

A
  • Number of workers

- Number of hours for which they work

23
Q

Reasons for an increase in quantity of labour

A
  • Increase in size of population
  • Higher proportion of people of working age
  • Higher retirement age
  • Reducing the school leaving age
  • Positive attitude to working women
24
Q

Labour force/ Workforce/ Working Population

A

People in work and those actively seeking work

25
Q

The number of hours which people work is influenced by:

A
  • Length of the average working day
  • Whether they work full or part-time
  • The duration of overtime
  • Length of holidays
  • Amount of time lost through sickness and illness
26
Q

Define

  • Output
  • Productivity
  • Labour Productivity
A
  • Goods and services produced by the FOPs
  • Output per FOP in an hour
  • Output per worker in an hour
27
Q

Reasons for an increase in quality of labour:

A
  • Better education
  • Better training
  • More experience
  • Better healthcare
28
Q

Define

  • Investment
  • Gross investment
A
  • Spending on capital goods

- Total spending on capital goods

29
Q

Define depreciation/ capital consumption

A

The value of capital goods that have worn out or become obsolete

30
Q

If a country produces $200 million capital goods one year and there is depreciation of $70 million, what is the net investment?

A

$130 million

31
Q

How can net investment be negative?

A

When the capital goods taken out of use are not replaced. The gross investment will be less than depreciation.

32
Q

Reasons for an increase in quantity of enterprise

A
  • Good education system including degrees in economics and business studies which increases the number of entrepreneurs
  • Lower taxes on firms’ profits
  • Reduction in government regulations
33
Q

Payments for the FOPS

A
  1. Capital- Interest
  2. Land- Rent
  3. Labour- Wages
  4. Enterprise (entrepreuners) - Profits
34
Q

What do consumers seek?

A

High quality

Low prices

35
Q

What do workers seek?

A

High wages, good working conditions, good chances of getting promoted, job satisfaction

36
Q

What do producers seek when determining what to produce?

A

Maximum profit

37
Q

Opportunity cost for the government

A

Spending the tax revenue

  • It could raise tax revenue, therefore the opportunity cost will be for the taxpayers as they’re giving up money they could’ve spent on something else
38
Q

What causes a shift to the right on a PPC?

A

Increase in quantity and quality of FOPS

39
Q

Potential Economic growth

Actual Economic growth

A

Potential is when the PPC diagram shifts to the right

Actual is when the output also increases along with the shift

40
Q

Analyse how a PPC illustrates scarcity, O.C and efficiency.

A

Scarcity- When your production point is outside of the curve, there is a scarcity of resources
O.C- When there’s movement on the diagram
Efficiency- When the point is on the curve

Eco- Mixed Revision (20 decks)

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