The Economic Problem Flashcards
Define Economy
The goods and services produced in an area
What is the difference between a good and a service
goods are tangible, services are not
What is corporation tax
Tax placed on profit
What are the factors of production
Capital
Enterprise
Labour
Land
What are the two types of land
Renewable and Non-Renewable
Define renewable resource
A resource capable of being regenerated
What is capital in terms of production
Man made tools
What is labour in terms of production
Human Resources (Workers)
Why is an enterprise important in terms of the factors of production
They are responsible for managing the other 3 factors of production
What is success defined as a enterprise
Profit
What is failure defined as for an enterprise
A loss of money
What can a loss of money lead to for an enterprise
A potential bankruptcy
Define The Economic Problem
How to use the available scarce resources to satisfy people’s infinite needs and wants as effectively as possible
Define Scarce
Not sufficient in quantity or amount
Name the 3 economic agents
producers, consumers, government
What are the economic agents
Groups that participate in an economy
Is labour scarce?
Yes because of skill shortages
What questions do the economic problem lead to
1) What to produce?
2) How to produce it
3) Who to produce it for?
Define Barter
a way of trading goods and services without money
Define constraints
Limits to what we can afford to consume
Define factor incomes
The reward to factors of production for example:
Labour receives wages
Land earns rent
Capital earns interest
Enterprise earns profit
What are free goods?
Goods that are unlimited in supply and which therefore have no opportunity cost
Define interest
The reward to the ownership of capital
Define rationing
A way of allocating scare goods and services when market demand exceeds available supply
How is scarcity a relative concept
They are only scarce in relation to the demands placed upon them
Define Opportunity Cost
The value of the next best alternative forgone
