The Economic Problem (1.1.3) Flashcards
What is The Economic Problem?
Unlimited wants and needs but we have finite resources. Not enough resources to fit the demand.
What does Scarcity mean?
When resources are finite or limited.
What are Renewable Resources?
Resources that naturally replenish themselves
Examples of Renewable Resources:
E.g. Wind, Solar
What are Non-Renewable Resources?
Resources that don’t replenish themselves.
What are examples of Non-Renewable Resources:
E.g. Coal, Oil, Gas
What are the three Economic Agents? (Part of economy-What makes up)
Producers (Makers)
Consumer’s (Buyers)
Government (Rulesetters)
What is Opportunity Cost?
Choosing one thing means giving up the next best alternative. The same resources can’t be used to produce different goods at the same time so decisions need to be made on how to use them. The limited amount of resources compared to the unlimited wants means that choices have to be made.
What’s a real-life situation where opportunity cost is present?
For example, if you go into a shop with £1, you can only buy a chocolate bar or a bag
of crisps. If you chose the chocolate bar, the opportunity costs is the bag of crisps that
you could not buy due to your limited resources.
What are resources in economics split up into?
The four factors of production
What are the Four Factors of Production?
Capital
Enterprise
Labour
Land
What do these four factors of production all mean?
Capital- Refers to all man-made resources that are used to produce goods or services in the future. Owners of capital receive interest on their land
Enterprise- Willingness and ability to take risks to make a product or service. Successful entrepreneurs earn a profit from their activities
Labour-Is all productive human effort both physical and mental, paid or unpaid.
Land- All natural resources used in production, such as raw materials, minerals, land and produce of the sea. Owners receive rent from land or sums of money from sale of land.
