Introduction to Micro - definitions

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Wants vs Needs

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wants are unlimited, according to economists. Needs are what are needed for basic human survival (eg food, shelter, clean water)

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Scarcity

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A situation that arises where people have unlimited wants, however the resources needed to meet these wants are finite.

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14 Terms

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Wants vs Needs

wants are unlimited, according to economists. Needs are what are needed for basic human survival (eg food, shelter, clean water)

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Scarcity

A situation that arises where people have unlimited wants, however the resources needed to meet these wants are finite.

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Opportunity Cost

The value of the next best alternative forgone when a choice is made

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the ‘economic problem’

how to best allocate scarce resources between alternative uses, to maximise economic welfare

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Factors of production

resources used in the production process.

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what are the factors of production?

  • labour

  • capital

  • land

  • entrepreneurship

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Labour (human resources)

the quantity of workers and their skill and knowledge (factory workers knowledge, secretary’s time)

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Capital (physical resources)

resources that are man made for production (roads, factories).

most factors of production are often capital

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land (natural resources)

non-renewable and renewable natural sources (wind, solar, coal, oil)

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entrepreneurship (entrepreneurial resources)

the organisation and risk-taking of a manager, who will bring resources together as a means of production.

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four main sectors

  • primary - the farming of raw materials and foods

  • secondary - industrialising raw goods into manufactured goods

  • tertiary - providing services and service-related industries

  • quaternary - branch of the tertiary sector; added information technology, research and development

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free goods

goods with no opportunity cost

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economic goods

goods that have opportunity cost. therefore, there will be an element of scarcity

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