The Economic Problem Flashcards
what is the basic economic problem
resources are scarce but wants are infinite - this forces economic agents (individuals, firms, governments) to make choices
what is an opportunity cost for consumers
what has to be given up when spending on an item
e.g. OC of buying a chocolate bar could be 2 packets of crisps
what is an opportunity cost for producers
the OC of buying a machine might be wages of workers
what is an opportunity cost for the government
OC of a fighter plane might be building two new primary schools
what is an economy
a system which attempts to solve the basic economic problem - of resources being scarce and wants being infinite
what are the 4 factors of production
- land
- labour
- enterprise
- capital
what is land as a factor of production
all natural resources
- from the earth, on the ground, in the atmosphere and in the sea
- include renewable and non-renewable resources
what are renewable resources
resources, such as fish stocks or forests, that can be exploited over and over again because they have the potential to renew themselves
what are non-renewable resources
resources, such as coal or oil, which once exploited cannot be replaced
what is labour as a factor of production
the workforce
what is human capital
the value of the productive potential of an individual group or workers - made up of skills, talents, education and training
what is capital as a factor of production
the stock of manufactured resources used in the production of goods and services
what are the two types of capital and what are they
working or circulating capital
-resources that are in the production system waiting to be transformed into goods or other materials before being sold to the customer
fixed capital
-economic resources such as factories and hospitals which are used to transform working capital into goods and services
what is enterprise as a factor of production
the seeking out of profitable opportunities for production and taking risks in attempting to exploit these
who are entrepreneurs
individuals who seek out profitable opportunities for production and take risks in exploiting these
-they organise production and take risks
