3.1.1 Economic Foundations

Define a want

A want is something that isn’t necessary, but is nice to have

Define a need

A need is something that is necessary for survival

What is economic activity?

Any action that relates to the making, buying, and selling of goods and services

What are producers?

A person, company, or country that makes, grows, or supplies goods or commodities for sale

What is a household?

Individuals or a group of people living together

What is a government?

Groups of people that have the power to rule in a territory according to the law

What is consumption?

The use of goods or services by households

What are the factors of production?

Capital, enterprise, land, and labour

What does the term factors of production mean?

The inputs used in the production of goods or services in order to make an economic profit

What is government revenue?

Government income from taxes and non-tax sources

What is government expenditure?

The amount spent by the government in its provision of public services

What are transfer payments?

Payments to individuals for which no goods or services are exchanged

What does land mean in the factors of production?

Natural resources that are used to make goods or services

What does labour mean in the factors of production?

The physical and mental human effort used in the production process

What does capital mean in the factors of production?

Factors of production used to create goods that are not themselves part of the production process (e.g laptops, machinery)

What does enterprise mean in the factors of production?

The factor of production that organises the other factors of production into a unit to produce a good or service

What is human capital?

The knowledge and skills a worker gains through education and experience

What are capital goods?

Buildings, machines, technology, and tools needed to produce goods and services

What is the economic problem?

Wants are unlimited and resources are scarce

What are finite resources?

Resources that will run out

What is opportunity cost?

The benefit lost of the next best alternative when making a choice

What are goods?

Items purchased to satisfy needs and wants