Topic 1: The Basic Economic Problem Flashcards
scarcity
unlimited wants but finite resources
the economic problem
unlimited wants exceed scarce resources
factors of production
the economic resources of land, labour, capital and enterprise
land
the economic resources from nature available for production (e.g. rivers, forests, plants)
paid using rent
labour
all human effort (mental and physical involved in producing goods and services
paid using wages
capital
human-made goods used in production
paid using interest
enterprise
risk bearing and decision making in business
consumers
people and firms who use need and want goods and services
producers
people and firms who use resources to make goods and services to satisfy wants and needs
opportunity cost
the cost of the next best alternative forgone
economic good
a product that requires resources to produce and has an opportunity cost
free good
a product that does not require resources to produce and therefore does not have an opportunity cost
production possibility curve
a curve which shows all the maximum output combinations of two products that can be produced using existing resources and technology
