What is Economics About? Flashcards
Wants (x2)
- Material desires of individuals or a community
- Items that provide some pleasure or satisfaction when consumed (utility)
Individual wants (x2)
- The desires of each person
- Depends on personal preferences and income
Economic problem (x4)
- Unlimited wants
- Scarce resources
- Unable to satisfy all wants with limited resources, we must choose between them
- Preferences are ranked, leaving some wants unsatisfied
Collective wants (x2)
- Wants of the whole community
- Governments provide collective wants from tax revenue collected from the community
Recurrent wants
- Wants that are satisfied over and over again in the future
Complementary wants
- A want that follows the initial satisfaction of another want e.g. a car -> petrol & car accessories
Name the factors that affect wants (x4)
- Age
- Income
- Technology
- Fashion
Key economic questions (x4)
What to produce - which wants will be satisfied and therefore what goods to provide
How much to produce - of each good in order to gain efficient use of resource
How to produce - how to allocate resources in the production process with maximum efficiency and the greatest number of wants satisfied
How to distribute production - what level of equity in distribution
Opportunity cost
- The cost of satisfying one want over an alternative want
Examples of opportunity cost (x3)
Individuals - the item bought/the want not satisfied
Businesses - Loss of opportunity to use the resources to produce another good or service
Government - the community wants that could have been satisfied with the resources
How can the PPF shift? (x3)
- Discovery of new resources
- Improvements in technology
- Improvements in productivity
New technology
More efficient production and higher levels of output from the same resources
New resources
An increase in the level of resources available for production means the economy can produce more of both goods
Implications of Focusing on Capital Goods (x2)
Short run - lower standard of living, less consumer goods available
Long run - higher standard of living & economic growth, increased productive capacity
Implications of Focusing on Consumer Goods (x2)
Short run - higher standard of living, more consumer goods available
Long run - lower standard of living, no increase in productive capacity
