T1 1.1.1 - 1.4.1 Introduction to markets and market failure

What are the 4 factors of production (CELL)

Capital

Enterprise 

Land

Labour

What is the economic problem

That we have unlimited wants as a society but only limited factors of production

Who chooses how these factors are used in a command economy and a free market society

In a free market society, supply and demand chooses

In a command economy, the government chooses

What does a production possibility frontier (PPF) show

A PPF shows the maximum potential combinations of output that can be produced in an economy when resources are fully and efficiently used

What is combined by firms into output

The 4 factors of production (Land, labour, capital and enterprise)

What is barter

Barter is how trade happened before the invention of money

What is the double coincidence of wants

For a trade to happen, both people must want what the other person has, at the same time and in the right amounts

What are the 4 functions of money

1. A medium of exchange

2. Measure of value

3. Store of value

4. A standard of differed payment