the basic economic problem Flashcards
(24 cards)
What are wants in economics?
Desires for goods and services
Wants drive consumer behavior and economic activity.
Define resources in the context of economics.
Factors used to produce goods and services
Resources include land, labor, capital, and entrepreneurship.
What is the economic problem?
Unlimited wants exceeding finite resources
This creates challenges in allocation and prioritization.
What is scarcity?
A situation where there is not enough to satisfy everyone’s wants
Scarcity necessitates choice and trade-offs.
What is an economic good?
A product which requires resources to produce it and therefore has an opportunity cost
Economic goods are contrasted with free goods.
Define a free good.
A product which does not require any resources to make it and does not have an opportunity cost
Examples include air and sunlight.
What are capital goods?
Human-made goods used in production
Capital goods are essential for creating consumer goods.
What are consumer goods?
Goods and services purchased by households for their own satisfaction
These include food, clothing, and appliances.
Who is an entrepreneur?
A person who bears the risks and makes the key decisions in a business
Entrepreneurs drive innovation and economic growth.
What does occupationally mobile mean?
Capable of changing use
This refers to labor that can switch between different jobs or industries.
Define geographically mobile.
Capable of moving from one location to another location
Geographical mobility is important for labor market flexibility.
What is mobility of labour?
The ability of labour to change where it works or in which occupation
High mobility of labor can help reduce unemployment.
What is mobility of capital?
The ability to change where capital is used or in which occupation
This can involve reallocating investments to more profitable areas.
Define mobility of enterprise.
The ability to change where enterprise is used or in which occupation
This reflects the adaptability of businesses in a changing economy.
What is the labour force?
People in work and those actively seeking work
The labour force is a key component of the economy.
Define productivity.
The output per factor of production in an hour
Improving productivity is essential for economic growth.
What does output refer to in economics?
Goods and services produced by the factors of production
Output is the end result of production processes.
What is investment in economic terms?
Spending on capital goods
Investment is crucial for long-term economic growth.
Define gross investment.
Total spending on capital goods
This includes all new spending before accounting for depreciation.
What is depreciation?
The value of capital goods that have worn out or become obsolete
Depreciation affects net investment calculations.
What is net investment?
Gross investment minus depreciation
Net investment indicates the actual increase in capital stock.
Define negative net investment.
A reduction in the number of capital goods caused by some obsolete and worn-out capital goods not being replaced
This can indicate economic decline.
What is opportunity cost?
The next best alternative forgone while making an economic decision
Opportunity cost is a key concept in economic decision-making.
What is a production possibility curve?
A curve that shows the maximum output of two types of products and combinations of those products that can be produced with existing resources and technology
The curve illustrates trade-offs and opportunity costs in production.
