The Economic Problem Flashcards
What is the problem of Scarcity?
When there are unlimited wants and finite resources
What is the Basic Economic Problem?
How to allocate scarce resources between alternative uses
What does Scarcity mean for society?
No society can produce sufficient products to satisfy everyone’s wants
What is Oppurtunity Cost?
Measures the value (benefit) of the next best alternative use of resources foregone
What are Goods?
Physical, tangible items
What are Services?
Activities that businesses or other people do for you
Intangible items
What are the four types of Goods?
Capital
Consumer
Economic
Free
What are Capital Goods?
Goods that help produce items in the future
Used to increase the future productive capacity of economy
eg. factories, machinery
What are Consumer Goods?
Goods that satisfy wants and needs now
eg. clothes
What are Economic Goods?
Goods which are scarce and there is an alternate use (oppurtunity cost) for them
eg. coal, oil, clothes
What are Free Goods?
Not scarce goods, are in unlimited supply and have no oppurtunity cost to society. Not necessarily free (priced) goods
eg. sunshine, air
What are examples of Economic Goods that can be mixed up as Free goods?
Goods and services supplied free of charge eg. NHS because use up limited resources
Good eg. water when population grows and water can’t be replenished
What are the 4 factors of production?
Capital
Enterprise
Land
Labour
What is the reward/return for Capital?
Interest
What is the reward/return for Enterprise?
Profit
