1.1.1 The Economic Problem Flashcards
What is the basic economic problem?
Scarcity
There are Limited resources and unlimited wants which means society has to make choices about what , how and for whom to produce
What are resources?
Factors of production
What are the factors of production
(CELL)
Capital
Enterprise
Land
Labour
What is Capital?
Man made aids to production e.g. machinery, vehicles or factories.
What is Enterprise?
Risk takers who innovate and produce goods and services to make profit
what is Land?
Natural land like rainforests and farmland where goods can be produced or taken from.
what is Labour?
Human workers who are producing goods and services.
we have scarce resources but ________ ______.
Unlimited wants
In a free market economy what determines the allocation of resources?
The market forces of demand and supply
What is a free market economy?
One where there is no interference from outside agencies such as the government
Define opportunity cost?
Opportunity cost is the cost of the next best alternative that has been sacrificed.
What is a trade off?
A trade off is a situation where having more of one thing leads to less of another e.g. government spending on schools leads to less money spent on healthcare
How do consumers, businesses and governments face trade offs?
Consumers- When having more of one thing and less of another
Businesses- an example is if they spend their money on promoting new products or existing ones.
Governments- Face trade offs whenever they consider costly policies.
