Unit 1: Basic Economic Problem- done Flashcards
What is production? What does it involve?
Production involves using resources to make and sell goods and services.
Factors of production are the input
Goods and Services are the output
What is the basic economic problem
The basic economic problem is that there is a scarcity of resources, this means we have can only use limited resources to produce our goods and services. Which is why we need to choose what we produce and consume.
What is the difference between capital and consumer goods- give the two types of consumer goods.
A capital good, doesn’t satisfy an immediate human want, while a consumer good does. A capital good is a human made product that helps in the production of other goods and services. Two types of consumer goods- durable: lasts longer and an example is cars
non-durable: perish instantly or easily. Example is food.
What is consumption, mention the type of individuals who consume, and what they exchange to consume. Explain what a free good and economic good is.
Consumption is the taking in of goods and services to satisfy human needs and wants. The people that buy economic goods and services to satisfy their needs and wants are known as consumers. The amount they spent is known as consumer expenditure. A free good is something that is so abundant supply that its free. eg: air. Economic good is the exact opposite.
What are factors of production and what are the 4 types?
The scarce resources we use up in the production of factors of production satisfy human needs and wants are also known as factors of production. The four are: land, capital, labor, enterprise.
What is land and its factor reward?
Land- natural resources ex: fish
factor reward: rent
What is labor and its factor reward?:
Labor- People who work with their hands and brains to produce economic goods
Factor reward: wages
What is enterprise and its factor reward?
Enterprise- A firm is an organization that employs resources to produce and supply goods and services. An enterprise is the ability to organize production in a firm. The people who manage and organize production in a firm are known as entrepreneurs.
Factor reward: Revenue is something that firms collect, after all costs have deducted the surplus is profit.
What is rewards of factor of production?
The payment that factors of production require and receive in order to participate in economic activity.
What is factor mobility?
Factor mobility refers to the ease at which factors or production can be moved from one productive activity to another without incurring any significant output loss.
How do firms move factors of production? Go into a depth about occupational and geographical mobility.
Occupation mobility refers to the ease at which factors of production can be moved between different productive activities. Geographical mobility refers to the ease at which factors of production can be moved between different locations. They can move between a firm, between industries, between firms in the same industry, and between different countries.
How can we increase the quantity and quality of the factor of production- land
Quantity:
- An increase in rents
- An increase in the natural resources found
- Making use of previously unused natural resources
- Planting and recycling plants
- Recycling and re-using goods we don’t use and don’t need or want.
Quality:
Fertilizers and better land management could improve soil conditions and allow crop to grow
- New technologies and advancements can improve plants resilience
- Using more organic, human methods for farming
How can we increase the quantity and quality of the factor of production- enterprise
Quantity:
-An increase in the price consumers are willing to pay, will result in more profit, encouraging more people to start firms.
- A fall in the number paid jobs and an increase in unemployment, will convince people to start their own firms.
Quality
- More and better training courses for people wanting to become entrepreneurs
- More and better business advice and support for young entrepreneurs.
How can we increase the quantity and quality of the factor of production- capital
Quantity:
- A decision by producers to produce more capital goods
- An increase in interest payments, will increase the capital investment that investors are willing to supply firms
Quality:
- Advancements in technology
How can we increase the quantity and quality of the factor of production- labor
Quantity:
- An increase in wages, may persuade more people willing to supply their labor to firms
- An increase in population
- Improvements in healthcare
Quality:
- Training and education will increase the skills of laborers
