economics- scarcity and choice

what is an economy

what is an economy

an economy is a system that tries to solve the basic economic problem

define a command economy

this is when the state makes the vast majority of decisons on how to allocate resources

list the 4 factors of production

1. land

2. labour

3. capital

4. enterprise

list 4 advantages of specialisation

1. workers specialising in one task become more efficient

2. no time wasted due to workers switching task

3. workers are more productive at assigned tasks

4. training costs are lower as only 1 individual needs to carry out the work

what is private benefit

the potential revenue to be earned

what is an externality

costs and benefits unlikely to be taken into account by the private sector
unintended effects on third parties( effect on the people around them)
these externalities dont generally affect the decisions of the private sector

how does a business contribute to the economy

• uses the 4 factors of production to produce goods that individuals want

• employs local people

• pays taxes on wages, profits and goods

• donates time and money to NGOs

how does the government contibute to the economy

• provides facilities to individuals, businesses and NGOs that nobody would pay for e.g roads,gardi

• manages taxes to provide pensions, child benefit, jobseekers allowance and grant aid for NGOs

list the 4 economic participants

1. individuals

2. businesses

3. governments

4. NGOs

what is private cost

the cost of an activity to an individual firm

what does the PPF do

the PPF shows the different combonations of 2 goods that can be produced using full employment of resources

define free market economy

tries to solve the economic problem with little government involvement
its up to the consumers and producers on how to allocate scarce resources

define economics

economics is a social science, it studies the behavoir of individuals and the society.
economics is also the study of the allocation of scarce resources

define specialisation of labour

 the seperation of a work process into mutiple taks, and each taks carried out by a seperate worker or a group of workers

list 3 disadvantages of specialisation

1. specialising in 1 task can become repetitive so staff morale can fall and become less productive

2. it allows little chance ofr career progression as no new skills are being developed

3. employment may be difficult to find as they have a narrow range of skills

define opportunity cost

loss of other alternatives

whats the basic economic problem

resources are scarce but wants are unfinite

net benefit

total benefits
the project is likely to proceed

what is net cost

 the total amount of costs 
generally the project doesnt proceed

differentiate between micro and macro economics

• micro economics studies the economic behaviour of individuals,households and firms or the smaller parts of the economy. deals with prices rising and falling

• macro economics studies the entire economy. deals with the total amount of goods and services produced in a country and the price and employment levels in the entire country . this allows us to compare economies

how does an individual contribute to the economy

• by buying goods and services

• offdering labour in exchange for wages

• paying taxes of income and consumption

• donating time and moeny to NGOs

3 examples of externalities

• noise and air pollution

• disfigurement of land

• risk of accidentto those living in the area

how does an NGO contribute to the economy

• provides a socially beneficial service that is unprofitable

• builds new skills for volunteers

• makes life better for individuals, businessses and governments

what does PPF  stand for

production possibility frontier

what are the 3 fundamental question and economy tries to answer

1. what is to be produced

2. how is production to be organised

3. for whom is production to take place