Theme 1 Economic problem

What is another name for resources

Factors of production

What is the economic problem

Human wants are unlimited, resources are scarce so choices must be made about the allocation of resources

What are the four types of factors of production

Capital, Enterprise, Land, Labour (CELL)

What is Capitol

Man made aids to production for example machinery, factories

What is Enterprise

Entrepreneurs, people/risk-takers who innovate and produce goods and services. They do it to make profit in the end

What is land

Natural land like farmland where goods can be produced or goods can be taken.

What is labour

Human resources, workers that can produce goods or services

What are resources?

Scarce

What choices need to be made on how to allocate scarce resources?

What to produce, how to produce and for whom to produce for.

What is a free good

Goods that are limitless in supply and therefore have no opportunity cost. Uses no scarce resources

What is opportunity cost?

The benefits of the next best alternative foregone when a choice is made

Explain Rational behaviour

Economic theory assumes that economic agents are able to rank the order of different outcomes from a decision in terms of their net benefits to them

What does economics assume economic actors rationally maximise

Welfare of consumers, Profits of firms, working conditions and income of workers and the government cares for everyones welfare.

How to measure choice? (in economics if its good or bad)

If the value of the next best alternative is greater than the value of our current choice we made a bad decision etc. Therefore allocate resources towards opportunity cost

What is a positive statement

Scientific/ objective statement which is provably correct/incorrect

What is a normative statement

Concerns value judgements (opinions) and cannot scientifically be proven true or false

Three functions of money

Medium exchange, Measure of value, Method of deferred payment

Two advantages of the division of labour

Two disadvantages of the division of labour

What are the different types of economy

free market, mixed, command