Part A: Basic Economic Concepts Flashcards
What are the three basic economic questions?
What to produce?
How to produce?
For whom to produce?
What is opportunity cost?
Opportunity cost is the alternative use to which economic resources could have been allocated. It is the not chosen option in a choice.
What are economic resources?
Economic resources are the inputs required by the producer to complete the production process. These are land, labour, capital and enterprise.
What is the difference between needs and wants?
Needs are someone thing required by a person in order for basic survival such as food and shelter. A want is something that isn’t needed for survival but assists in allowing a person to live comfortably.
Define scarcity.
Scarcity is the state of being low in supply.
What are complementary products?
Complementary goods are goods that go alongside another product. For example, an iPad and an iPad case.
What are substitute goods?
Substitute goods are goods that replace another, or are purchased instead of another. For example, a gas heater and an electric heater.
What is the law of demand?
The law of demand states that of the price increases, demand decreases, and as the price decreases, demand increases.
What are the factors of demand?
Preferences
Income
Expectations
Price of complementaries
What is the law of supply?
The law of supply states that where price increases, supply increases and where prices decreases, as does supply.
What are three supply factors?
Price of input - The lower the price input, the more profit per unit
Price of other products - If one products price is higher than another, producers may be more willing to supply more of the dearer product
Producer expectations - high/low expectations will effect willingness to supply
What is the difference between goods and services?
The difference between goods and services is a good is something relevant to the consumer whereas a service is something offered/supplied by the producer. For example, a good would be food while a service would be waiting.
What is consumer sovereignty?
Consumer sovereignty is the prospect that the consumer determines where resources are allocated; the consumer is king.
