eco - basic needs of man

also includes OC, FOP and types of economies

what are the 4 basic economic needs of man

food

water

shelter

clothing

what are wants

when all our basic needs of food, water and shelter are met and satisfied, we have desires which are called wants

what is scarcity?

mans wants are unlimited but resources are limited (land, labour, machines)

what are free resources

things that nature provides us in unlimited supply

what are examples of a free resource/good

one provided by nature that has no change (sunlight , winds etc)

what is a renewable resource

resources that can be increased by the efforts of man (trees, cattle, crops)

what are non-renewable resources

resources that cannot be increased by the efforts of man (fossil fuels, precious minerals like coal and gold)

what is an economic good?

produced by man and has a price

what is oppurtunity cost?

the next best alternative forgone

(if we have limited resources and we choose to buy one good and not the other then the good that we cannot have (sacrifice) is called opportunity cost

what are the three economic questions

what to produce?

how to produce?

for whom?

what are the four factors of production

land

labour

capital goods

enterprice/entreprenaurship

what is land in terms of FOP

this is a natural resource. Includes the surface of Earth, the rivers, lakes, forests. also includes mineral deposits below the earth and the climate

what is labour in terms of FOP

this is a human resource. the population size will determine the number of people who will work some people may be under working age, (e.g school students, retired)

what is capital goods in terms of FOP

tools and machinery includes from complex printing machinery to a motor spanner. They help workers improves output of goods = more units produced

What is enterprise in terms of FOP

the person who put together the buisness idea. they translate the idea they have into a reality, by setting up the business.

there is the risk of undertaking the production but if they succeed the reward is profit

what does good factor endowment mean?

some countries posses a large quality of high quality FOP they can create many goods to satisfy the needs of their population

what is the function of an economy?

to resolve the basic economic problem and know how to allocate scarce resources to best satisfy infinite wants

what is a free market economy?

resources will be allocated through the spending decisions of millions of different consumers and firms

what are the features of a free market economy

motivation

private ownership: property, houses

free enterprise: the ability to have your own business

competition:

decentralised decision making: without govt

what is the role of the govt in a free market economy

they govt has a very restricted role in the economy

they are restricted to national defence issue money, raise taxes and act against monopolies

what is a command economy

through a planning process, the govt allocates resource to society (e.g North Korea)

what are some key features of a command economy

motivation is very low

there is a private ownership everything is owned by state

the state will direct labour into jobs that need to be done, direct consumers what to consume, and direct producers what to produce

how is little choice demonstrated in a command economy?

people are allocated jobs

consumers have very little say in what is provided

goods in shops are very limited

one type of car, soap etc

very little say in public healthcare, transport etc

how is income and growth affected in a command economy

if command economies are poorly planned they will not grow economically, which leads to a increase in wastage of resources.

no incentives for factories to produce more

how is distribution of income affected in a command economy

since resources are all allocated by the state, all people have minimum standard of living. those in power however have a better standard of living

what is the risk involved with command economies

each person recieves money according to their needs:

larger family = larger house

sick = medical treatment

not able to work = income

this removes incentives to work harder and improve lifestyle

how do command economies affect the environment

if environmental protection is not taken into account in the planning stage then considerable damage will occur in the environmental protection

what are the political and social costs of a command economy

little room for freedom of choice

reply on police state to enforce policies

political rights of people taken away

what is a mixed economy

consumers demand and firms produce them

goods and services are not produced by private sector but will instead be produced by the govt through taxes (e.g healthcare, education, schooling)

what are the key features of a mixed economy

motivation - people and firms work harder

private ownership - houses, cars

free enterprise - promotes businesses

competition - firms lead to productive efficiency

govt provides public goods, and maintains law and order