The basic economic problem Flashcards
What is resource
Resources: Anything used in the production of goods and services.
What is Scarcity
Scarcity: A situation where there are insufficient resources to meet all of the needs and wants in a given situation.
What is the economic problem
The Economic Problem: Where there are infinite needs and wants but finite resources with which to meet them, resulting in choices which have be made about how best to distribute those resources.
What are free goods
Free goods: Good which have no opportunity cost because no resources are required to produce them.
What are economic goods
Economic goods: Goods which require factors of production to produce them, resulting in an opportunity cost.
What is the reward for land?
Rent
What is the reward for labour?
Wages
What is the reward for capital?
Interest
What is the reward for enterprise?
Profit
What are the main sector of industry
Primary sector
Secondary Sector
Tertiary sector
What is factory mobility?
Factor Mobility: Factor mobility measures the extent to which factor inputs such as land, labour and capital can easily switch between alternative uses with no loss of efficiency.
What is geographical mobility?
Geographical mobility refers to the willingness and ability of a person to relocate from one area to another for employment purposes. Factors affecting this can include:
o The availability of work in a given area
o The cost of living
o Family ties
o The cost of moving or selling property
What is occupational mobility?
Occupational mobility refers to the ease with which a person is able to change between jobs. Factors affecting this can include:
o The availability of alternative employment/unemployment
o Their skill levels
o The availability of training
What causes the changes in the quantity and quality of factors of production?
- Changes in the costs of factors of production
- Government policies can affect the costs of production, such as through the use of taxes and subsidies.
- New technologies
- Net migration of labour
- Improvements in education and healthcare
- Unfavorable weather conditions
What is opportunity cost?
Opportunity Cost: The next best alternative foregone (the option lost when a decision is made).
The option lost when we make the choice (or the sacrifice made) is known as the opportunity cost.
