The Economic Problem Flashcards
Scarcity in economics means?
Insufficient resources to meet all the wants in society.
Name the four factors of production (inputs)and what they are.
Land- natural resources on the planet
Labour- Quality and quantity of workers
Capital- man made means of production. Can be used to produce other goods and services
Enterprise- Entrepreneur who invest the money and take the financial risks
Define ‘wants’
Wants in economics represent thing people would like irrespective of whether or not they have the money to buy it or not
What is production?
Production is the process by which output is produced using factors of production (inputs) to help satisfy people wants.
Output can be categorized into two things:
GOODS- they can be touched
SERVICES- They can’t be touched
There are two types of goods:
Consumer Durables- Can be used over and over again. e.g. phone
Consumables- Single use goods e.g. food and drink.
Define ‘opportunity cost’
the cost of the next best alternative forgone
What does a production possibility curve (PPC) show?
It shows the concept of opportunity cost and the maximum combinations of output of 2 goods that can be produced using:
- Existing resources
- Current technology
A PPC will only shift if one or both of two things occur, which are?
- factors of production
- the state of technology
What is specialization?
Specialization is where a country or a firm concentrate their resources to produce a narrow range of goods and/or services
What is division of labour?
It is the breaking down of jobs into separate or smaller tasks
In a PPC what is the trade-off
The trade off is the choice society has to make between producing two alternative goods.
What are the advantages of specialization?
Increase in quantity produced Increase in productivity of labour Improved quality of output Greater innovation Stronger brand image Firm gains economic scale- reduction in avereage total cost of production
What are the disadvantages of specialization.
Over reliance on narrow range of products
Higher cost of production is you nedd specialist equipment/labour
A limited market to sell to
