Chapter 3 - The Economic Problem Flashcards
Basic Economic Problem
Resources have to be allocated between competing uses because wants are infinite whilst resources are scarce.
Capital
Stock of manufactured resources used in the production of goods and service.
Economic Goods
Goods that are scarce because their use has an opportunity cost.
Enterprise
Seeking profitable opportunities for production and taking risks to exploit them.
Factors of Production
Land, labour, capital, enterprise
Fixed Capital
Economic resources (factories/hospitals) which are used to transform working capital into goods and services.
Free Goods
Unlimited supply and this have no opportunity cost.
Human Capital
Value of productive potential if people. Made up of skills, talents, education, training. Represents value of future earnings and production.
Labour
The workforce.
Land
All natural resources.
Needs
The minimum necessary for a person to survive.
Non-renewable Resources
Resources which can’t be replaced after being exploited. Coal and oil.
Non-sustainable Resource
Can be economically exploited where stock is reduced over time.
Opportunity Cost
Cost of forgoing the next best alternative.
Renewable Resources
Can be exploited repeatedly because the have the potential to renew. Forest and water.
