The flow of money Flashcards
What is the basic economic problem
-People have unlimited needs and wants but the money and resources needed to fulfill these needs and wants is limited
Free goods
-These are needs and wants that people don’t have to pay for
-They satisfy needs
-They are unlimited
-Nobody can own or control them
-Can’t be regarded as a sign of wealth
e.g Oxygen
Economic goods
-They satisfy needs and wants
-People are prepared to pay for them
-They are very limited- they have a price attached to them
-They belong to whoever pays for them
-They can be regarded as an indication of wealth
What does the economic cycle/ flow of money look like?
-Goods and services are exchanged for money which is used to satisfy needs and wants
What are the 4 factors of production
-Capital- Money invested into a business and comes back with interest
-Natural resources- Businesses pay rent for them
-Labour- Salaries and wages are paid for these
-Entrepreneurship- They open a business and make a profit from them
What is the role of households in an economy
-They contain all 4 factors of production and they sell them to businesses who use them to produce goods and services
-Households earn money from this and use the money to satisfy needs and wants
What is the role of businesses in an economy
-Buy factors of production from households
-Use factors of production to produce goods and services
-Sell the goods and services back to households at a profit
Types of goods sold by businesses
-Convenience goods- Goods that are easy to access
-Selective goods- Goods that people are picky about
-Speciality goods- Expensive goods with a specific purpose
-Service- aren’t physical (intangible goods)
The Role of government in an economy
-They receive taxes from businesses and households
-They use the taxes to build infrastructure that promotes productivity
What is the foreign sector
-An open market where goods and services are imported (bought) from other countries and exported (sold) to other countries
Reasons for international trade
-Improved transport and communication
-Consumers can buy luxury items from overseas
-Countries can get natural resources from other counties
-Certain climates allow for certain crops to be farmed
Problems caused by international trade
-Distance between countries makes it difficult to trade
-Importing and exporting can be difficult due to certain country’s laws
-International trade is complicated
-Prices aren’t stable as the exchange of currency causes the exchange rate to fluctuate
