Topic 1-Economic Foundations Flashcards
The basic economic problem
People have unlimited wants but there is a limited amount of resources.
A need
Any good or service that is necessary for survival such as food and water.
The key economic decisions
What to produce
How to produce
Who is to be if it from the goods and services produced
Government (example of exonmic problem)
The government has finite resources and its spending power is limited by the amount of tax they can collect.
They need to decide whom they spend money on
Producers(economic problem)
A producer needs to remain profitable so it will need to produce goods that are high in demand and respond to changing demands and buying habits of consumers.
Workers(economic problem)
Householders will also face decisions on how much to work and what qualifications to obtain.
Consumer(economic problem)
Households have limited income
The factors of production
Land
Capital
Labour
Entrepreneur
Land
This is raw materials available from mining,fishing,agriculture
Capital
This is a manufactured item used to aid production for example machines factories and computers
Labour
Human workers who are involved in producing the good
Entrepreneur
The individual or business who take the initiative to set up a business and employ different factors of production
Opportunity cost
The next best alternative foregone / sacrificed
Economic sustainability
How decisions affect finances -costs
Social sustainability
How decisions affect a community’s quality of life and wellbeing
