The economic problem Flashcards
Scarce resources
Resources that are limited in supply so that choices have to be made about their use.
Scarcity
Scarce means limited. There is only a limited amount of resources available to produce the unlimited amount of goods and services we desire.
Economic goods
Good that are scarce because their use has an opportunity cost.
Free goods
Goods that are unlimited in supply and which therefore have no opportunity cost
Wants
Desires for the consumption of goods and services.
Needs
The minimum that is necessary for a person to survive as a human being.
Basic economic problem
There are infinite wants but finite factor resources with which to satisfy them
Opportunity cost
The benefits forgone of the next best alternative.
What three parts do economists distinguish to the economic problem?
WHAT is to be produced?
HOW is production organised?
For WHOM is production to take place?
Factors of production
land
labour
capital
enterprise
Land
As a factor of production, is all natural resources.
Non-renewable resources
Resources such as coal or oil, which once exploited cannot be replaced.
Renewable resources
Resources, that can be exploited over and over again because they have the potential to renew themselves. Examples are fish stock, forest or water.
Scarce resources
Resources that are limited in supply so that choices have to be made about their use.
Sustainable resources
Renewable resource that is being economically exploited in such a way that it will not diminish or run out.
Labour
As a factor of production is the workforce.
Human capital
The value of the productive potential of an individual or group or workers; it is made up of the skills, talents, education and training of an individual or group and represents the value of future earnings and production.
Capital
As a factor of production is the stock
State the two types of capital
Working or circulating capital
Fixed capital
Working or circulating capital
Resources that are in the production system waiting to be transformed into goods or other materials before being finally sold to the consumer.
Fixed capital
Economic resources such as factories and hospitals which are used to transform working capital into goods and services.
Enterprise or entrepreneurship
As a factor of production is the seeking out of profitable opportunities for production and taking risks in attempting to exploit these.
Entrepreneur
Individuals who seek out profitable opportunities for production and take risks in attempting to exploit these.
