The basic economic problem--- The role of economic agents Flashcards
What is the basic economic problem?
how to satisfy infinite wants from finite resources. resources have to be allocated between competing uses and scarcity occurs among rich and poor people.
What are free goods?
no opportunity costs, they are not scarce
What are economic goods?
There is scarcity and value, so people are willing to pay for it.
What is scarcity?
a limited amount/ not enough if everyone wants it
Needs?
goods and services that are required
Wants?
goods and services that aren’t necessary but we still wish for them
What are factors of production?
resources required to produce goods and services
Factors of production- LAND?
Natural resources (oil water trees)
Factors of production- LABOUR? How could it be improved?
the productive contribution made by individuals who work- can be improved by education.
Factors of production-CAPITAL///MANUFACTURED RESOURCES?
used in combination with land and labour to produce what we want e.g. machines and buildings.
Factors of production- ENTERPRISE///ENTREPRENEURSHIP
Founding new business ideas and using the other 3 factors of production to make a profit.
ROLE OF ECONOMIC AGENTS-HOUSEHOLDS? 2 groups
CONSUMERS- purchase goods and services , main objective is to maximise welfare
WORKERS-employed by businesses to make goods and services, objective is to get higher wages
ROLE OF ECONOMIC AGENTS- BUSINESS?
own or hire many of the factors of production. Role is to provide goods or services to households, to make profit
ROLE OF ECONOMIC AGENTS- GOVERNMENT?
Ensure households and businesses have a fair and stable environment to operate. Decide whether to intervene with the economy.
What rewards to each factor of production produce?
Land=rent
Labour=wages
capital=interest
Enterprise=profit
