Economics: Factors of Production, Opportunity Cost, PPC, and SDGs

Vocabulary flashcards covering basic economic concepts, factors of production, mobility, economic and free goods, opportunity cost, Sustainable Development Goals (SDGs 7, 13, 14, 15), and Production Possibility Curves (PPC).

Basic economic problem

Unlimited wants paired with limited resources.

Land

Natural resources such as soil, minerals, forests, and oil; its financial reward is rent.

Labour

The physical or mental effort of humans; its financial reward is wages.

Capital

Manmade resources used to produce other goods, like machines; its financial reward is interest.

Enterprise

The ability to organise the other factors of production, take risks, and start a business; its financial reward is profit.

Occupational mobility

The ability of labour to efficiently change from one job to another.

Geographical mobility

The ability of labour or capital to move from one location to another efficiently.

Advantages of factor mobility

Fills labour shortages, reduces wage gaps across different regions, and increases firm flexibility to respond faster to changes in consumer demand.

SDG 7 (Affordable and Clean Energy)

Linked to the basic economic problem because energy resources are limited, requiring economies to use energy efficiently to meet people's needs.

SDG 14 (Life Below Water)

Focuses on limited ocean and marine resources, noting that overfishing and pollution reduce these resources, so economies must use them sustainably.

SDG 15 (Life on Land)

Linked to opportunity cost because using land for housing or industries means giving up the opportunity to use that same land to protect forests and wildlife.

SDG 13 (Climate Action)

Linked to the PPC because a country with limited resources must choose between producing goods or protecting the environment; allocating more resources to clean energy leaves fewer available for other goods.

Opportunity cost

The next best alternative forgone when a choice is made.

Importance of opportunity cost

Encourages prioritization of needs and wants, helps governments, firms, and individuals make rational choices, and ensures scarce resources are allocated efficiently.

Economic goods

Goods that are scarce relative to demand, such as phones and cars.

Free goods

Goods so abundant that using them costs nothing, such as air and sunlight; they are gifts of nature with no production or opportunity cost.

Production

The process of combining resources (inputs) to create goods and services (outputs) that satisfy consumer needs and wants, generating income, employment, and economic growth (GDP).

Production Possibility Curve (PPC)

A graph that shows the maximum output of different alternative goods that can be produced given the available factors of production and level of technology.

Curved shape of PPC

Occurs because land and resources are not identical and some suit one good better than another, meaning resources are not equally efficient at producing both goods.

Points under a PPC

Indicate that resources are wasted and not being used to their maximum potential.

Points on a PPC

Indicate that resources are being used to their maximum potential.

Points beyond a PPC

Combinations that are impossible for an economy to produce with its current level of resources.

Capital goods

Goods used to produce other goods.

Consumer goods

Goods used directly by consumers.

Movement along a PPC

Changing the amount of one good produced to produce more or less of another good, which demonstrates the concept of opportunity cost.

Shift to the right in PPC

An increase in the quantity or quality of economic resources caused by discovering natural resources, increasing labour/capital, improving technology or healthcare, or investing in infrastructure.

Shift to the left in PPC

A decrease in the quantity or quality of economic resources caused by resource depletion, pollution, wearing out of capital equipment, or declining workforce and enterprise skills.

Climate change impact on PPC

Ignoring climate change leads to more floods and droughts that damage resources and infrastructure, shifting the PPC inward and reducing possible output.

Clean energy investment impact on PPC

Government investment in clean energy, green technology, and climate-resilient infrastructure shifts the PPC outward, enabling more sustainable output while supporting SDG 13.