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Economics Unit 1 > The economic problem. > Flashcards

The economic problem. Flashcards

1
Q

What is the central purpose of economic activity?

A

To produce good and services to provide what we need and want

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2
Q

What are the key questions? (3)

A

What should we produce?
How should we produce it?
For whom should it be produced?

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3
Q

What is economic welfare?

A

The benefit an individual or society gets from the allocation of resources

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4
Q

What is scarcity?

A

There are not enough resources to meet the needs and wants

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5
Q

What is opportunity cost?

A

The next best alternative forgone

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6
Q

What is an economic good?

A

Goods that are scarce and therefore have an opportunity cost

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7
Q

What is a free good?

A

Goods that have no opportunity cost

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8
Q

What are the factors of production?

A

Capital
Enterprise
Land
Labour

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9
Q

What are the rewards for the factors of production?

A

Interest
Profit
Rent
Wages

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10
Q

What are renewable sources?

A

Resources that are able to be replenished over time

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11
Q

What is a consumer’s main objective?

A

Maximise their own welfare

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12
Q

What is a worker’s main objective?

A

Maximise their gains from working

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13
Q

What is a firm’s main objective?

A

Maximise profits

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14
Q

What is profit?

A

When total income or revenue for a firm is greater than costs

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15
Q

What is a free market economy?

A

One in which there is limited government involvement in providing goods and services

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16
Q

What are the functions of the price mechanism?

A

Signal
Incentive
Ration

17
Q

What is productive efficiency?

A

When a firm operates at minimum average total cost

18
Q

What is allocative efficiency?

A

Achieved when you cannot produce more of one good without making less of another

19
Q

What is productivity?

A

Output per worker

20
Q

What is human capital?

A

The skills of labour

21
Q

How can we improve human capital? (3)

A

Training
Education
Better management

22
Q

What is the division of labour?

A

Breaking the production process down into a sequence of tasks, with workers assigned to particular tasks

23
Q

What is specialisation?

A

The production of a limited range of goods by an individual factor of production or firm or country

24
Q

How does specialisation increase productivity?

A

Workers develop particular skills

25
Q

What is a normative statement?

A

Opinions that require value judgments to be made

26
Q

What is a positive statement?

A

Statement that can be tested against real world data

Economics Unit 1 (12 decks)

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