1.1.3 Flashcards
(19 cards)
What is the basic problem of economics?
Scarcity
Why is scarcity a problem?
People have finite needs, but infinite wants, as no one would choose to live at the level of basic human living standards if they enjoy more.
Why is scarcity a relative concept?
As resources are not necessarily scarce themselves but they are scarce in relation to the demands placed upon them.
What are examples of scarcity?
Water in India and China and food shortages around the world.
How do economies try to solve the basic economy problem?
Working out what to produce, how to produce it and for whom production should take place.
What is a renewable resource?
Renewables are replaceable if the rate of extraction is less than the natural rate at which a resource renews
What are examples of renewable resources?
Oxygen, solar power, wind.
What is non-renewable resource?
A resource of economic value that cannot be readily replaced by natural means on a level equal to consumption.
What are examples of non-renewable resources?
Fossil fuels such as coal, oil and gas.
What leads to an opportunity cost?
The same resources cannot be used to produce different goods at the same time so decisions have to made on how to use them.
What is the opportunity cost?
The cost of one thing in terms of the next best option which has been given up.
What is an example of an opportunity cost?
If you go to the shop £1, you can only buy a chocolate or a bag of crisps. If you choose the chocolate, the opportunity cost is the bag of crisps that you could not but due to your limited resources.
What resources is there no opportunity cost for?
Free resources.
What are the four factors of production?
Land, labour, capital and entrepreneurship.
What is land?
All the natural resources used in production. Such as raw materials, minerals, land and produce of the sea.
What is labour?
Is all productive human effort, both physical and mental, paid or unpaid. The value of the worker is their human capital.
What is capital?
Refers to all man-made resources that are used to produce goods or services in the future. Owners of capital receive interest on their land.
What is entrepreneurship?
The willingness and ability to take risks of combining the other three factors of production in order to make a product or service.
