Topic 1 - Economic Foundations Flashcards
(24 cards)
Define Needs
A good or service considered essential or required to live or survive for example water and food.
Define Wants
Goods or services considered desirable but not essential. For example, a game console or TV
What is the purpose of economic activity?
To produce goods and services which satisfy consumer needs and wants. This means using resources to produce outputs.
Define a Good
Tangible and physical items, such as food
Define a Service
Intangible, non-physical products sold and provided by a business, such as a haircut
What are the 3 key economic decisions
- What to produce
- How to produce
- Who is to benefit from the goods or services produced
Name the 3 main groups in an economy
Consumers
Producers
Government
Define a Consumer
A person who purchases goods and services for personal use
Define a Producer
A person or company that supplies goods or services for sale
Define a Government
The organisation in charge of regulating consumers and producers
How do Consumers interact in the economy
- Pay taxes to the government
- Receive benefits from the government through public services and infrastructure
- Buy goods and services from producers
How do Producer interact in the economy
- Pay taxes to the government
- Receive benefits from the government through public services and infrastructure
- Sell goods and services to consumers
How does the Government interact in the economy
- Impose and regulate consumers and producers through taxes and laws
- Receive tax income from consumers and producers
Name the factors of production
C - Capital
E - Enterprise
L - Land
L - Labour
Define Land
The natural physical resources that are available to an economy. Anything that can be used on/in/under the ground. It includes both physical space where production occurs and the natural physical resources used obtained from the land .
What is the reward for land
Rent
Define Labour
Human capital - The workforce of the economy who are the human input into production. These are people who are willing and able to work.
What is the reward for labour
Wages
Define Capital
Machinery, tools and man-made inputs that are used to produce goods and services. e.g. a factory
What is the reward for capital
Interest
Define Enterprise
A specialised form of labour input - individuals who take the factors of production and convert them into goods/services to be sold for profit. e.g. entrepreneur
What is the reward for enterprise
Profit
What is the basic economic problem
That there are unlimited wants and needs but an inadequate number of resources to cover
Define opportunity cost
The “next best alternative” forgone when an economic decision is made. Opportunity cost is what you didn’t choose
