Unit 1 - The basic economic problem Flashcards
Economic problem (DEFINE)
- Unlimited wants exceeding finite resources
Resources are…
scarce, limited
- factors used to produce g+s
Scarcity)
A situation where there is not enough to satisfy everyone’s wants
Free goods (DEFINE)
- A product which does not require any resources to make and so does ont have an opportunity cost
example : water in river, sunshine, air.
Economic goods (DEFINE)
- A product which requires resources to produce and therefore has an oppportunity cost
Factors of production (4)
The economic resources of
- Capital
- Enterprise
- Land
- Labour
Land (DEFINE)
Gifts of nature available for production
Labour (DEFINE)
Human effort used in producing goods and services
Capital /(goods) (DEFINE)
Human-made goods used in production
Consumer goods (DEFINE)
Goods and services purchased by households for their own satisfaction
Enterprise (DEFINE)
Risk bearing and key decision making in business
Mobility of the FoP (2)
- Occupational mobility
- Geographical mobility
Mobility of labour (Reasons)
- Differences in price/availability of housing in different areas
- Family ties
- Differences in educational systems
- Lack of information
- Restrictions on movement of workers
Occupational mobility (DEFINE)
Capability of changing use
Geographical mobility (DEFINE)
Capability of moving from one location to another location
Mobility of labour (DEFINE)
Ability of labour to change where it works or in which occupation
Mobility of capital (DEFINE)
Ability to change where capital is used or in which occupation
Mobility of enterprise (DEFINE)
Ability to change where enterprise ise used or in which occupation
Entrepeneur (DEFINE)
A person who bears the risk and makes the key decisions in a business
Labour force (DEFINE)
People in work and those actively seeking work
Productivity (DEFINE)
The output per factor of production in an hour
Labour productivity (DEFINE)
Output per worker hour
Output (DEFINE)
Goods and services produced by the factors of production
Quantity of labour determinants (5)
- Size of population
- Age structure of population
- Retirement age
- School leaving age
- Attitude to working women
Investments (DEFINE)
Spendings on capital goods
Gross investment (DEFINE)
Total spending on capital goods
Depreciation (captial consumption) (DEFINE)
Value of capital goods that have worn out or become obsolete
Net investment
Gross investment minus depreciation
Opportunity cost
Next best alternative foregone to satisfy the other
PPC
- Production Possibility Curve
Maximum combination of two goods that can be produced with available resources
