The Economic Problem Flashcards
What is the central purpose of economic activity?
The production of goods and services to satisfy needs and wants
What are the questions? (3)
Who should we produce for?
What should we produce?
How can we produce it?
What are the factors of production?
Capital
Enterprise
Land
Labour
What are the rewards for the factors of production?
Interest
Profit
Rent
Wages
What is a free good?
A good that has no opportunity cost
What is an economic good?
A good that has a benefit to society, but it has an opportunity cost
What are the main objectives for firms? (3)
Profit
Revenue (sales)
Growth
What is the main objective for an individual?
Maximise welfare
What is a scarce resource?
Factors of production for which demand exceeds supply
What are the X and Y axis on a PPF?
X = consumer goods. Y = capital goods
If an economy was productively efficient, where would the economy be on the PPF?
Anywhere on the PPF
If an economy sits within the PPF, what does that mean?
The economy is not using all of the available resources
What is an opportunity cost?
The next best alternative forgone
What is the difference between a positive statement and a normative statement?
A positive statement can be verified true or false. A normative statement is the expression of an opinion
