test 1 Flashcards
Scare resources
finite or limited resources
economic goods
scarce goods
free goods
goods that are not scarce as they are unlimited in supply and therefore have zero opportunity cost towards society e.g. sunlight
needs
what people require in order to survive
wants
are the desire for the consumption of goods and services
basic economic problem
the allocation of resources between competing uses because wants are infinite but resources are scarce
opportunity cost
the benefit of the next best alternative being given up
Factors of production
The inputs to production being :
- land
- labour
- capital
- enterprise
non-renewable resources
resources that once used will never be replenished and will run out one day.
renewable resources
resources that can be used and replaced/recreated. Won’t run out e.g. trees and water
labour
the workforce of an economy
Human capital
the value/quality of the labour
Capital (econ definition)
Man-made aids to production. There are two types of capital:
- working capital
- fixed capital
working/circulating capital
stocks of raw materials, semi-manufactured goods, and finished goods that are waiting to be sold. These stocks circulate or move through the production process until they are sold to a consumer
fixed capital
the stock of factories, offices, and machinery. This is used to transfer working capital into finished products
production possibility frontier
a curve that shows the maximum potential level of output of two goods or services with given factors of production. It illustrates the production level if all resources in the economy are used efficiently
Margin
a point of possible change on the PPF
consumer goods
goods and services that are used by people to satisfy their needs and wants
capital goods
goods that are used in the production of other goods, such as factories, offices, roads, machines, and equipment.
Productive efficiency
production takes place at the lowest cost. This occurs when a given set of resources produces the maximum number of goods. All points on the boundry (on the PPF) are productively efficient.
Allocatively efficient
when social welfare is maximized
Specialization
the production of a limited range of goods by an individual, firm or country in co-operation with others so that together a complete range of goods is produced
Globalization
is the tendency for the world economy to work as one unity, led by large international companies doing business all over the world
division of labour
the specialization of workers who perform different tasks, at different stages of production, to make a good or service in co-operation with other workers.
productivity
output per unit of input employed
labour productivity
output per worker
capital productivity
output per unit of capital employed
Primary sector
the sector of the economy where raw materials are extracted and food grown
Secondary / manufacturing sector
Where raw materials are transformed into goods
Tertiary/ service sector
the service sector e.g. education and retailing
Public sector
the state or government sector of the economy
Private sector
the part of the economy owned by private individuals, firms, and charities
Markets
Where buyers and sellers meet to exchange goods and services (another name for this is the price mechanism)
Sub-markets
markers within a larger market
self-sufficiency
being able to provide all the things you need without help from other people
Money
anything that is widely accepted as payment for goods and services performed or repayment of past debt.
What are the functions money have to fulfill
- Medium of exchange
- Measure of value
- A store of value
- A method of deferred payment
Barter economy
an economy that has no money rather exchange is conducted directly by swapping one good with another.
Double-coincidence of wants
Where each party to the transaction wants what the other has to trade
Cash
token money that can be in the form of notes and coins
Near monies
assets that fulfill some but not all the functions of money
Liquidity
the ease to change an asset into cash.
Assets
resources owned by a business or an economic entity
Financial assets
a non-physical asset whose value is obtained from a contracted claim such as bonds and stocks