The basic economic problem Flashcards
What do we mean by scarcity?
A lack of goods and services available to satisfy unlimited wants
What is the difference between consumers and producers?
Consumers are people who buy goods and services to satisfy their wants. On the other hand, producers are people who create and supplies these goods and services
What is the basic economic problem?
There are limited resources and unlimited wants, which leads to a problem of scarcity. Therefore, choices have to be made about what goods and services to produce, how it will be produced, and who can consume these goods
What is the difference between wants and goods
A need is a good or service that is ESSENTIAL to our life, while a want is good or service that we would LIKE to have
what is the difference between a free good and an economic good? give examples
- Economic goods are goods that are sold at a price, this is because it is scarce, such as cars, clothes, and phones
- Free goods are goods that are not scarce (unlimited), such as air, sunlight, and ocean water
What are the 4 factors of production?
Labour, Land, Capital, and Enterprise
Rewards for: Land = ? Enterprise = ? Labour = ? Capital = ?
Land = Rent Enterprise = Profit Labour = Wages Capital = Interest
What is it meant by Mobility of factor of production?
How easy or difficult it is for factors of production to transfer industries
What is the difference between geographical and occupational mobility?
Geographic mobility refers to a worker’s ability to work in a particular physical location, while occupational mobility refers to a worker’s ability to change job types.
What does it mean when a factor of production is immobile?
Factor immobility occurs when factors of production have a difficult time moving between different areas of the economy
What is opportunity cost?
The next best alternative given up when making an economic decision
How does a production possibility graph illustrate opportunity cost?
The curve measures the trade-off between producing one good versus another. For example, producing 75 wheat and 50 rice. Or you can produce 150 rice and 25 wheat.
Why is the Production possibility curve not straight but an outward curve?
Its always drawn as a curve and not a straight line because there a cost involved in making a choice, when the quantity of one good produced is higher and the quantity of the other is low. This is known as opportunity cost.
What will move the Production Possibility Curve to the right?
Developments such as:
- Additions to resources, such as more available labour from immigration
- Training of labour in the form of improvements to education
- Improvements in technology, such as more efficient equipment
what causes the Production Possibility Curve to shift inwards?
- Less Resources
- Natural disasters
- labor migrates away to other countries
- War
