The Economic Problem Flashcards
What is the economic problem?
Scarce resources for unlimited wants
What is scarcity?
Unlimited wants and finite resources
What questions does the issue of scarcity make societies face?
✚ What to produce and how much to produce?This relates to the different types of goods the economy should produce and how much of each.
✚ How should the goods and services be produced?
Production maybe labour intensive, i.e. a high proportion of labour used relative to capital, or capital intensive, i.e. a high proportion of capital used relative to labour.
✚ How should the goods produced be allocated?This is concerned with the distribution of the goods produced and affects the degree of equality in the society.
What are the four factors of production
Land- refers to natural resources such as oil, forests and land itself
Labour- is all of the work done by humans in production
Capital- things which are used to make goods and services
Enterprise- willingness of people in business to take risks to make a profit.
What are renewable resources and renewable energy?
Renewable resources are those whose stock levels can be maintained at a certain level.
Renewable energy is energy that can be used without supply being diminished
Eg. Solar energy, wind power, wood, fish
What are non renewable resources and non renewable energy?
Non-renewable resources
are those that will eventually be completely depleted.
Non- renewable energy is energy that is finite in supply and non-sustainable for future generations
Eg. Oil, copper, platinum
What is opportunity cost?
Opportunity cost is the next best alternative that is forgone when a choice is made.
What are the uses of opportunity costs
Consumers- use it to decide what to spend their incomes on.
Producers- use it to decide what and how to produce goods and services
Government- use it to decide what polices to choose
What are economic agents?
Economic agents are groups that participate in an economy
What are the 3 types of economic agents
Producers- create goods and services. In economies, another word for a business is a firm
Consumers- buy goods and services made by firms. Individuals and firms can be consumers
Government- sets the rules that other economic agents must follow.
What are economic goods?
Economic goods are created from resources that are limited in supply and so are scarce. Consequently, they command a price.
What are free goods?
Free goods are unlimited in supply, such as sunlight or sand on a beach. Consumption by one person does not limit consumption by others. Therefore, the opportunity cost of consuming a free good is zero.
