The Economic Problem Flashcards
(5 cards)
1
Q
What is the basic economic problem?
A
How to allocate scarce resources to meet unlimited wants.
2
Q
What are the four factors of production?
A
Land – natural resources (e.g. fields, oil, forests)
Labour – human input into production
Capital – man-made tools and equipment used to produce
Enterprise – entrepreneurs who organise the other factors and take risks
3
Q
What is opportunity cost?
A
The value of the next best alternative foregone when a choice is made.
4
Q
What are the three fundamental economic questions?
A
- What to produce?
- How to produce it?
- For whom to produce?
5
Q
Who answers the three economic questions in a market economy?
A
What: Decided by consumer demand
How: Decided by businesses based on efficiency
For whom: Those with sufficient income can access goods/services
