Sec.1 The basic economic problem Ch.1-4 Ian Flashcards
(39 cards)
The basic economic problem
The issue with the scarcity of resources but unlimited wants and needs (demand).
Opportunity cost
The loss of potential gain from other alternatives when one alternative is chosen.
Economic goods
Goods and services that require resources to produce/provide and has an opportunity cost.
Free goods
Goods that require no resources to produce/provide and has no opportunity cost.
Factors of production
The resources used in the production and provision of goods and services.
The 4 factors of production
Land, labour, capital and enterprise.
Land
‘Gifts of nature’ (natural resources) available for use in the production and provision of goods and services.
Labour
Human effort used in the production and provision of goods and services.
Capital (goods)
Man-made goods used in the production and provision of goods and services.
Enterprise
Risk bearing and key decision making in business.
Consumer goods
Goods used to provide satisfaction to their owners.
Capital/producer goods
Goods wanted for what they can produce.
Occupational mobility
Capability of changing use.
Geographical mobility
Capability of changing location.
Mobility of labour
The ability of labour to change where it works or in which occupation it works in.
Factors affecting mobility of labour
Differences in price and availability of housing in different locations, family ties, differences in education systems in different locations, lack of information, restrictions of labour’s occupational mobility, etc.
Mobility of capital
The ability of capital to change where it is used or in which occupation it is used.
Mobility of enterprise
The ability of enterprise to change where it is used or in which occupation it is used.
Factors affecting quantity of land
Land reclamation, soil erosion, the usage, destruction, and replenishment of natural resources.
Factors affecting quality of land
Usage of fertiliser, pollution levels, irrigation, climate factors, soil mineral content.
Factors affecting quantity of labour
Size of labour force (affected by size of population, age structure, retirement age, school leaving age, attitude towards working women, unemployment rate, etc) and and working hours (affected by length of average working day, whether workers work full or part time, duration of overtime, holiday length and frequency, and time loss due to illness, etc).
Factors affecting quality of labour
Education, training, experience, healthcare, incentives, etc.
Depreciation
The value of capital goods that have worn out of become obsolete.
Factors affecting quantity of capital
Investment, depreciation.
