unit 1 Flashcards
what is the basic economic problem
human wants and needs are limitless but resources are scarce
define economics
a social science that studies how economic stakeholders interact, behave and use scarce resources
what is an economic stakeholder
anyone that impacts or is impacted by economic decisions and activities
list the six economic stakeholders
- consumers/individuals
- producers/firms
- labours/workers
- government
- environment
- community
define ‘opportunity cost’
the value or benefit of the next best alternative foregone
what is the main opportunity cost of a consumer
opportunity cost arises when consumers make choices on what goods and services to purchase and consume
what is the main opportunity cost of a producer
opportunity cost arises when producers make choices on what goods and services to produce and how to produce them
what is the main opportunity cost of a worker
opportunity cost arises for workers when they make choices on what they want to work as and who they want to work for
what is the main opportunity cost of the government
opportunity cost arises for the government when they make choices on the policies they make and what to spend on public expenditure
list the factors of production
- land
- labour
- capital
- enterprise
what does ‘land’ refer to
all natural resources
give some examples of ‘land’
oil, coal, sand, stone, fossil fuels, minerals, fields, soils, seas, lakes, oceans, rivers, sunlight, air, forestry, plants, animals, etc
what does ‘labour’ refer to
all human resources
give some examples of ‘labour’
knowledge, skills, experience and expertise of a worker
(teachers, doctors, scientists, chef, nurse, waiter, cashier)
what does ‘capital’ refer to
man made resources used to aid in the production of other goods and services
give examples of ‘capital’
machinery, tools, equipment, vehicles, factories, buildings, roads, railways etc
define enterprise
the willingness and ability to take on the risk and reward when combining the factors of production to produce goods and services
give examples of ‘enterprise’
sole traders, partnerships, public limited companies, private limited companies, non-profit organisations etc
list the factor rewards
- land - rent
- labour - wages
- capital - intrest
- enterprise - profit
define ‘free goods’
goods with no opportunity cost
give some examples of ‘free goods’
water, air, sunlight
define ‘economic goods’
goods with opportunity cost
define ‘consumer goods’
goods used and consumed by consumers
define ‘capital goods’
goods used by firms to produce other goods and services
define ‘private goods’
goods that can be excludable and rivalrous
define ‘public goods’
goods that are non-excludable and non-rivalrous
define ‘merit goods’
goods that have benefits, have positive externalities, and are usually under-consumed and underproduced in a free market
give examples of merit goods
education, healthcare, waste disposal services
give some examples of public goods
street lamps, lighthouse, national defence
define ‘demerit goods’
goods that are harmful, have negative externalities, and are usually over-consumed and overproduced in a free market.
give some examples of demerit goods
cigarettes, alcohol, junk food
what are the classification of goods and services
free goods and economic goods
what are the two types of factor mobilty
occupational mobility and geographical mobility
define ‘occupational mobility’
the degree to which a factor of production can change its USE
define ‘geographical mobility’
the degree to which a factor of production can change its LOCATION
what is a production possibility curve (PPC)
a curve that shows the MAXIMUM OUTPUT of TWO types of products and the COMBINATION of those products that can be produced with EXISTING RESOURCES and TECHNOLOGY
how occupationally mobile is land
mostly mobile
how occupationally mobile is labour
it depends on several factors
how occupationally mobile is capital
it depends on the type of capital
how occupationally mobile is enterprise
the most mobile
how geographically mobile is land
mostly immobile
how geographically mobile is labour
it depends on several factors
how geographically mobile is capital
it depends on the type of capital
how geographically mobile is enterprise
the most mobile
give some examples of how land is occupationally mobile
- forestry can be used to produce paper, rubber, wooden furniture, wood tables, wood chairs
- cows can be used to produce dairy products (milk, cheese, etc) leather, instruments, meat, a mode of transport and fertilisers from it’s waste
give some examples of how labour is occupationally mobile
it depends on a person’s knowledge, experience, expertise, qualification and skills
- a doctor can also be a check if they know how to cook well (the knowledge, experience, qualification)
- a lawyer cannot be a chef if they don’t know how to cook well (the knowledge, experience, qualification)
give some examples of how capital is occupationally mobile
- an oven can be used to bake pizza in a restaurant or cakes at a bakery
- a road can only be used for travelling on.
give some examples of how enterprise is occupationally mobile
a sole proprietor should be able to produce a vast variety of goods and services.
give some examples of how land is geographically mobile
- the sun, oceans, river, lakes, mountains cannot be moved
- a cow or horse can easily be moved
give some examples of how labour is geographically mobile
it depends on:
- transport, family obligation, housing, ability to gain work visas etc
give some examples of how capital is geographically mobile
- an oven can be moved easily
- vehicles can be moved easily
- a building cannot be moved easily
- roads cannot be moved easily
give some examples of how enterprise is geographically mobile
a sole proprietor should be willing and able to move from one part of the city/country to another to run their business.
what does PPC stand for
production possibility curve
define the term ‘shift outwards’
a PPC will shift outwards if there is an increase in the quantity or quality of factors of production in the economy
define the term ‘shift inwards’
a PPC will shift inwards if there is a reduction in the quantity or quality of factors of production in the economy
define the term ‘pivot outwards’
a PPC will pivot outwards if there is an increase in the quantity or quality of factors of production for a specific or particular sector/industry/product in the economy
define the term ‘pivot inwards’
a PPC will pivot inwards if there is a reduction in the quantity or quality of factors of production for a specific or particular sector/industry/product in the economy
