Topic 1 - The Basic Economic Problem Flashcards
What is economics?
How individuals, businesses and governments make the best possible use of the scarce resources they have so they can achieve the highest possible standard of living
Define the basic economic problem
We have unlimited wants but there are limited resources available so we have to make a choice
Define opportunity cost
The sacrifice of the next best alternative
Name the factors of production
CELL
CAPITAL - all man made resources used to produce goods and services eg machinery
ENTERPRISE - the combination of land labour and capital to produce goods and services. Without someone to combine this factors, wealth would not be created.
LAND - the natural resources on offer. Not only the land itself and what grows on it, but the sea and what lives there as well.
LABOUR - the human effort in the production of goods and services.
What is occupational mobility
The ability for resources to change their use
What is geographical mobility?
The ability for resources to change their location
The ability for resources to change their location
When firms replace one resource with another, this usually occurs between labour and capital. This means that they can produce more for a lower cost.
State 3 advantages of using capital as a substitute for labour
Can make production faster
Machinery can work 24/7
Machinery less subject to error
State 3 disadvantages of using capital as a substitute for labour
Capital initially costs a lot to buy
Machines can break down
There are some jobs that need human input
Name the 3 sectors of industry
Primary sector - businesses that are involved in exploiting natural resources
Secondary sector - businesses that are involved in manufacturing and construction, taking natural resources from the primary sector and changing them into things we use.
Tertiary sector - businesses providing services rather than goods.
