The Economic Problem Flashcards
what is the economic problem
when demand is greater than supply, peoples wants are infinite and resources and finite
what 3 descisions have to be made to overcome the basic economic problem
what to produce
how to produce
for whom to produce
what is opportunity cost
the benefit lost from picking the next best alternative
what are capital goods
goods purchased by firms and companies
what are consumer goods
goods purchased by consumers, households like sweets or food
what is a PPC
a production possibility curve which is a line on a graph which shows the amount of 2 goods which can be produced if all resources in a nation are used up
what happens when a country moves along a PPC
if a country is producing 8 consumer and 4 capital (millions) and it moves along the PPC so it produces 6 consumer and 6 capital, a opportunity cost is incurred, 2 million consumer is sacrificed so 2 million more capital is raised, the OC is 2 million
what is economic growth
increase in the level of output by a nation
usually an increase in the production of all goods so the PPC will shift outwards
what are the reasons for economic growth (4)
new technology
improved efficiency
education and training
new resources
