1.1 Economic Groups and FoPs Flashcards
(11 cards)
role of consumers
In economics, a consumer buys goods or services for their own personal use rather than for use in production. A consumer is an end-user of a good, so the decision to buy or use is at the very last stage of the production of a good. For instance, when an individual decides to buy and consume a drink from a shop, they are acting as a consumer.
Consumers make choices about their spending, deciding whether it is worthwhile to buy a good. To make this decision consumers weigh up their benefits or the satisfaction gained from using a good against the price they would have to pay to obtain it (these decisions will be discussed in greater detail later in the book).
It is often considered that as consumers act mostly on an individual basis, they may have little power in a market. If this is the case, they may need protection from the actions of more powerful producers who dominate a market. These producers may control the price, quantity or quality of a good.
As a result, the government may intervene with regulations to protect consumers. For example, the Food Safety Act 1990 sets requirements for the food industry, such as to protect consumers from misleading labelling of a food as ‘nut-free’ when it may include traces of nuts (this is also discussed in greater detail later in the book).
role of producers
role of government
interdependence (+ example)
where one group responds to the actions of another group
each groups decision affects the final choice of how to allocate resources
For instance, the government may give a sum of money to farmers for milk production in the hope that it will result in citizens’ increased milk consumption. This extra income makes it more worthwhile for farmers to produce milk and so they respond by increasing production. Furthermore, with the extra money generated, farmers may be able to accept a lower price for milk. In response to a lower price, the consumers are likely to buy more milk. Therefore, the government achieves its aim of an increase in milk consumption through the interaction between the three economic groups.
land
capital
labour
Labour refers to the human resources that are available. This resource depends on the size of the population, the impact of migration and the working age within a country. It is also affected by the quality of the labour, so the extent of education and training as well as the health of the population all have an impact. For instance, if a government requires children to attend school, eventually there should be a higher proportion of the population who can read and write. This should benefit the economy by increasing the amount of output made, simply because there are now more workers who can read and write instructions linked to a job. Similarly, if the healthcare within a country improves, workers should have better health and take less time off work for illness, which also increases output. An increase in the quantity and the quality of the labour force may affect the strength of a country’s economy.
enterprise
Enterprise is when the other factors of production are organised to make goods and services. It requires an individual entrepreneur or organisation to tackle two key areas: to organise production and to bear the risks of the project.
An entrepreneur is the person who puts enterprise into practice. It is the person who is willing to take forward the business idea and organise all the other factors of production to create the final goods and services. The entrepreneur also either bears the financial risk of the project or is held responsible for it by those who have funded the project. However, the concept equally includes any local business owners.
combining FoPs
eg: car producers decide how much of their production should be completed by machines on the production line (capital) and how much workers should produce by ‘hand’ (labour). This results in certain quantities of these two factors of production being used. It may also have an impact on the amount of natural resources (land) utilised. For instance, production line machines may be more efficient and waste fewer resources than individual workers. Advances in technology play a part in how factors of production are combined, as well as the decisions taken by the entrepreneurs running the business.
The development of the Ford Motor Company is a good example of how the combination of factors of production changes over time. At the start of the twentieth century, Ford made just a few cars per day at its main factory, using mainly labour. Ford then changed production to using more machines. This vastly increased its output and signalled a change from methods using mainly labour to methods using more machines. As technology has advanced in the motor industry, machinery can now complete the majority of jobs. In other words, the use of capital has overtaken that of labour.
CoR: impact of education on quality of labour
government makes school attendance compulsory
over time more workers can read and write
enables them to read and write job instructions
workers become more skilled
output in an economy increases
CoR: impact of healthcare on quality of labour
improvement in healthcare
over time workers have better health
means they need fewer days off for illness
fewer drops in production
output for firms can increase
