Unit 1: the basic economic problem Flashcards
What is the basic economic problem
there’s unlimited want and limited resources to fulfill these wants.
What are economic goods
goods that are produced with resources, thus limited in supply and have a opportunity cost
What are free goods
a product that doesn’t require any resources to make and don’t have a opportunity cost
What is opportunity cost
the best forgone alternative
What is factors of production
economic resources that are used to produce goods and services
What are the 4 factors of production
land, labour, capital, and enterprise
What is land in economics
any natural resource used in production including coal, fish, e.t.c
What is labour
covers any human labour, including mental and physical effort. A bank manager and shein factory worker are all labour.
What is human capital
not labour it refers to the education, training, and experiences that enhance the ability for workers to produce
What is capital
any manufacted meaning human made good that is used to produce other goods. This includes offices, railways, e.t.c.
What is a capital good
a good not wanted for their own sake but what they can produce
what is a consumer good
are wanted for the satisfaction they can provide
Is land mobile
occupationally yes, the same piece of land can be used for different purposes, but geographically not so much.
Is labour mobile
It depends on factors such as
lack of information
restrictions on movements of workers
lack of appropriate skills and qualificaitons
family ties
differences in pricing and housing
is capital mobile
depending on the type of capital good, a screw driver is mobile but a factory is not. A building is occupationally mobile but not a robot who screws caps on.
Is enterprise mobile
it’s the most mobile FOP, the skills of an entrepaneur can be applied in any industry and they can theoretically work in any country.
Does quanitity of land FOP change
yes, for example forests are decreasing at fast amount, soil erosions, but some resources are renewable.
Can quality of land FOP change
yes, pollution may cause it become worse or fertilizer may cause it to become better.
Can quantity of labour change
yes it depends on the size of the population the larger it is the more labour
the age structure a country with a highererporportion of people of working age will have more labour
the retirment age the higher it is the more labour is available
lowering school leaving age increases labour
Can quality of labour change
better education, training, experience, and health care increase quality as they’re more prepared to carry out difficult tasks,.
Can quanity of capital change
yes and it’s influenced by investment. Each year there will be capital goods that physically wear out, and newer capital goods will replace it. The total spending on capital goods in gross investment. The value of capital goods that are worn out are depreicant. Net investment is the value of extra capital goods made, it’s gross investment minus depreiation/
Can quality of capital chagne
yes if technology advances capital goods produce more and higher quality.
Can quantity of enterprise chagne
yes a good education system can develop them, a lower tax on firm profits, and reduction in government regulations
Can quality of enterprise cahgne
yes same cocnept as labour if they recieve better education, training, experience, or health care they will increase in quality. More experience is significant as the knowledge and understanding they gain help them make a better business.
How are FOP payed
firms/businesses pay wages to labour for their service. eneterpaneurs for bearing risks and organizing other fops earn profit. Land recieves rent and interest is the payment for capital
What are needs
Things necessary for survival
What are wants
Things not necessary for survival
What’s scarcity
the limitation of resources such as land, capital, labour, and entrepeanurship
Difference between scarcity and shortage
Shortage is referring to quantity demanded is larger than quantity supplied. Whereas shortage focuses on limitations of resources.
What are economic agents
People has an influence on the economy by producing, buying, or selling meaning they’re decision makers
Examples of economic agents
households, firms, and government
How is land resources paid
In rent to whom the owner is
How is labour resources paid
wages and salaries
How is capital resources paid
interest paid to providers of capital
How is entrepeneur resources paid
profit
Data response question answers
First is a calculation question, then identiy and state whatever they ask you for the 2 marker. The next two marker you must explain 2 clear and distinct reason why. For the 4 marker there should be a 2 paragraph answer each paragraph having a how and why. For the next 4 marker draw, label the axis, shift curve, remiemeber to note down the equilibriums
How to answer question words starting with discuss
To write two sided answer with depth and strong links in analysis. With a evaluation
How to answer analyse questions
state the relationship, add supporting evidence.
How to answer explain
Wirte the purposes and reasons explicitly state their relationship
How to answer questions starting with describe
the characteristics or main features of it
What is a PPC
Production possibility curvce
What does a PPC show
shows the different combinations of two goods that can be produced given a full employment of resources
How does PPC show scarcity
you can’t produce beyond the curve
How does the PPC show tradeoffs
be as you increase production of one produce the other product must decrease in production
How are opportunity costs show in production possibility curves
the products you give up to make more of another produce
where are effeciient combos in PPC
on the curve
When are PPC curves straight
When the two products are similar, thus having similar resources needed to be produced, the straight PPC curve signifying a constant opportunity cost
Why are most ppc curves curves
There’s an increasing opportunity cost between the two products. THis is due to the fact the resources required for both products are different, at first the resrouces used will be the ones that are most suited for one of the product.
What’s the law of increasing opportunity cost
when all resources are being used, an increase. inteh production of one good there will be a higher opportunity cost of the other good
What does the PPC assume
only twoo good are produced, the quantity and quality. ofresources available is fxed and the state of technology remians unchanged
Reasons why the PPC shifts
Change in quanitty. orquality of resources or advances in technology,
Consumer goods
wanted for. thesatisfaction they provide the consumer
capital good
wanted for their ability to create another g/s
What’s human capital
the training, experience, and skills workers gain
What’s a economy
a system of activities including production, consumption, and exchange of goods and services on a loca, national, or global scale
What’s the economic system
what g/s should be produced, how will it be produced, and who can biy the g/s
What are g/s
goods and services, goods being physical products we consume, services are activites provided
How are the three main economic systems difefernt
based on how they answer the questions of what to produce, how to produce it, and who recives it
Properties of planned economy
owned by the government, regulated by the government, and prices of g/s are controlled
Properties of free marker
firms are owned by private sectors, there’s a freedom to start businesses, and prices are determined by supply and demand
What’s the private sector
private individuals and businesses. the main objective being to make profit
the public sector
a countries economic sector that’s run and controlled by the government
How do private sectors make money
they earn our money through provding us goods and services we want or neeed
How does competition aid consumers
it keeps prices equal around every store and low
How is the public sector funded
using our tax money, no competiton as no matter what we fund it. Government decideds on how large or little the funding is
Proper way to answer a two mark questions
use full terminology, and provid two sentences
Private sector and public sector comparisons
the private sector is more efficient having better quality of products and customar service as theyc ould be closed down without consumers.
Proepr way to anwer a 4 mark question
provid two points and two explanations one each paragraph usually 4-6 sentences
how to answer 6 mark question
look at the command word, if it says analyse provide 3 paragraphs on epoint one explanation, if it asks to draw a diagram draw a fully labelled diagram and then a explanation. Finally discuss, whether or whether or not provide two points with explanations for one side and a point with explanation from the other side of the argument. there’s no need for a conclusion
