CIE ECONOMICS CHAPTER 1 The Basic Economic Problem

CIE IGCE ECONOMIC CHAPTER 1 FLASHCARDS

What is the Basic Economic Problem?

How to satisfy unlimited wants and needs with scarce resources

What is Economics?

The study of how to satisfy the Basic Economic Problem

What are the three economic agents?

-Consumers

-Firms

-Government

What are the three economic problems?

-What to produce?

-How to produce?

-For whom to produce?

What’s a good?

An item that can be bought and sold

What’s a service?

Non-physical paid produce

What are economic goods?

Resources that are limited

What are free goods?

-Unlimited resources

What are the four factors of production?

-Capital—Money, tools, machines, and factories

-Enterprise—Business skills

-Labour—human work

-Land— Limited natural resources

What are the rewards for the 4 factors of production?

-Land—Rent

-Enterprise—Profit

-Capital—Interest

-Labour- Wages and Salaries

What are the six factors which could affect the quantity and quality of produce?

-Costs of production

-Government policies

-New technologies

-Net migration of labour

-improvements in living conditions

-Weather conditions

What is Opportunity cost?

The cost of the next best opportunity foregone

What are the opportunity costs for various parts of the economy?

Workers-Specialization'

Producers-Competing business opportunities

Governments-Where to allocate the budget

Consumers-limited income

What is Product possibility curve?

A graph that shows the production capacity of an economy to produce 2 goods/services at any given time?

Draw and label a PPC graph

This is it

What are the requirements for an economy to be on the PPC curve?

-No wasted resources

-No unemployed resources

What are the two ways the Graph shifts?

-Moving along the curve

• Shifting resource allocation

-shrinking/expanding

• Change in production capacity

• Quality or quantity of production