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Economics > Unit 1 - The Basic Economic Problem > Flashcards

Unit 1 - The Basic Economic Problem Flashcards

1
Q

What is a need?

A

A need is something that you require to survive.

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2
Q

What are some examples of needs?

A

Water, food and shelter.

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3
Q

What is a want?

A

A want is something that you desire but is not necessary for survival. It is something that you believe would enhance your life.

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4
Q

What are some examples of a want?

A

A mobile phone, laptop or an ipad.

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5
Q

Distinguish between a want and a need.

A

A need is something that you require to survive whereas a want is something that you desire but is not necessary for survival. It is something that you believe would enhance your life. We have a finite amount of needs but an unlimited amount of wants.

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6
Q

What is the basic economic problem?

A

Humans wants for goods and services are unlimited , however the resources or factors of production used to produce these goods and services are limited or finite. eg… Therefore not all wants can be satisfied and choices have to be made. THE BASIC ECONOMIC PROBLEM IS SCARCITY. It affects all countries rich and poor.

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7
Q

What are examples of the basic economic problem?

A

Labour is limited to the available workforce.
Land is limited to the quality/quantity available.
Capital is limited by the amount of investment.

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8
Q

What is opportunity cost?

A

Opportunity cost is the sacrifice of the next best alternative foregone.

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9
Q

What is an example of opportunity cost?

A

If you have £1 and you want a Mars bar and a Twix and you choose to buy a mars bar. The twix would be the opportunity cost.

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10
Q

What is Scarcity?

A

Human wants for goods and services are unlimited however the resources or factors of production used to produce these goods and services are limited or finite.

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11
Q

What is choice?

A

Resources are scarce and many needs and wants cannot be satisfied. As such, choices must be made. Households, businesses, and governments are always making choices between alternatives competing with each other.

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12
Q

What do individuals aim to do when they make choices?

A

They aim to maximise their utility. (satisfaction)

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13
Q

Why do individuals have to make choices?

A

Because they have a limited income.

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14
Q

What choices do individuals have to make?

A

They have to decide how to spend their limited income in order to maximise utility.

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15
Q

What is an example of an opportunity cost for individuals?

A

If they had the choice to buy a laptop or a computer. If they chose to buy a laptop, the computer would be the opportunity cost.

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16
Q

What do firms aim to do when they make choices?

A

They aim to maximise profit.

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17
Q

Why do firms have to make choices?

A

They have limited factors of production (resources)

18
Q

What choices do firms have to make?

A

They have to decide what to produce in order to maximise profit.

19
Q

What is an example of an opportunity cost for firms?

A

To produce laptops or computers. If they chose laptops, computers would be the opportunity cost.

20
Q

What does the government aim to do when they make choices?

A

They aim to improve as many people’s welfare as they can.

21
Q

Why does the government have to make choices?

A

Because they have a limited amount of tax revenue.

22
Q

What choices does the government have to make?

A

They have to decide what goods and services to provide to maximise welfare of society.

23
Q

What is an example of an opportunity cost for the government?

A

To provide more schools or to increase spending on defence. If they choose to provide more schools, the opportunity cost would be increasing spending on defence.

24
Q

What is land?

A

This covers all natural resources in the earth, sea and physical land.

25
Q

What are some examples of land?

A

Fish, oil, diamonds and water.

26
Q

What is labour?

A

Labour is the physical and mental effort used by people to produce a good or service.

27
Q

What are some examples of labour?

A

A factory worker or a teacher.

28
Q

What is capital?

A

The man-made resources used to produce goods and services.

29
Q

What are some examples of capital?

A

coffee makers, schools, computers.

30
Q

What is enterprise?

A

Enterprise is the bringing together of the other factors of production by an entrepreneur. They spot the gap in the market and take risks in order to set up a business.

31
Q

What is an example of an entrepreneur?

A

Will Shu, Elon Musk

32
Q

What is the return for land?

A

In return for providing land, households receive rent as a payment.

33
Q

What is the return of labour?

A

In return for labour, households receive wages.

34
Q

What is the return for capital?

A

In return for capital, households receive interest.

35
Q

What is the return of enterprise?

A

The entrepreneur does this in return for profit.

36
Q

What is geographical immobility?

A

Geographical immobility refers to the barriers faced by people moving from one location to another to find work.

37
Q

What are some reasons why geographical immobility might exist for labour?

A

-Family and Social ties
-The financial costs involved in moving home include the costs of selling a house and removal expenses
-Huge regional variations in house prices leading to a shortage of affordable housing in many areas
-The high cost of renting property
-Differences in the general cost of living between regions and also between countries
-Migration controls
-Cultural and Language barriers

38
Q

What is occupational immobility?

A

Occupational immobility refers to inability of workers to move easily between different occupations because of a lack of transferable skills.

39
Q

What are some reasons why occupational immobility might exist for labour?

A

-Lack of education
-Lack of qualifications
-Lack of transferable skills

40
Q

What policies can be used to improve occupational mobility?

A

-Invest in training schemes for the unemployed to boost their human capital to equip them with new skills and transferable skills.
-Subsidise the provision of vocational training to raise skill level of individuals/
-Improve the education system to give more opportunities to gain better and more diverse qualifications.

41
Q

What policies can be used to improve geographical mobility?

A

-Reforms to the housing market, to improve supply of housing and reduce price of rented properties and to increase supply of affordable properties.
-Specific subsidies, for people moving into areas where there are shortages of labour

Economics (13 decks)

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