The economic problem Flashcards
Name the four factors of production
Land
Labour
Capital
Enterprise
What is land
Land is natural resources we use to produce a good
What is labour
Labour is the time and effort we devote to producing goods and services
What is capital
Capital are the manmade resources used to produce other goods and services
What is entrepreneurship
The decisions people make about how to use and organise resources
What is the basic economic problem
The basic economic problem is that resources are limited but human wants are unlimited
What are needs
Needs are things necessary for survival
What are wants
Wants are things that bring us pleasure but are not necessary for survival
Define opportunity cost
Opportunity cost is the sacrifice of the next best alternative
Give an example of opportunity cost
When choosing to pay off your loan instead of buying a new car with your yearly bonus, the new car is the opportunity cost
What is an economy
An economy is an area in which people make or produce goods and services
What are consumer goods
Consumer goods are goods that satisfy consumer’s wants
What is a Production Possibility Frontier
A Production Possibility Frontier shows the different combinations of two goods that an economy can produce, assuming that all resources are fully and efficiently used
What does a PPF show
The maximum productive potential of an economy (points on the curve)
Whether resources are left unemployed (points inside the curve)
Positive and negative economic growth (shifts)
Give two reasons for positive economic growth
Increase in technology
Increased efficiency and productivity
