Approaches to the Economic Problem

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  • Approaches to the Economic Problem
    • Secondary sector
      • the raw materials are manufactured into goods
    • Tertiary sector
      • services provided
    • Primary sector
      • raw materials are extracted
    • Market economy
      • resources are allocated by private groups/individuals in the public
    • Mixed economy
      • A mixed economy has both public/private enterprises. Both the government and free market own/allocate others
    • Planned economy
      • The government owns everything and controls all prices/incomes
    • Public sector
      • This sector is owned by private individuals/groups. Their main aim is profit maximization.
    • Private sector
      • This sector is owned by individuals/groups in the public to provide goods and services.
    • Specialisation
      • An individual, group or even country which excels best at a certain thing
        • Individuals, firms and countries specialize because it allows buyers to satisfy their needs and wants at a good quality and high quantity
      • Individuals specialising
        • Costs
          • Worker may eventually become bored of their job
          • The workers' skills could suffer from doing only one job
          • Workers could get replaced by machinery
        • Benefits
          • Specialized workers tend to get a higher pay
          • Workers' specific skills will be improved
          • More motivation when satiufied with their job
      • Firms specialising
        • Costs
          • Greater cost for training workers
          • Quality can suffer when a worker eventually becomes bored of their job due to the lack of variety
          • Workers are more expensive
        • Benefits
          • Workers become quicker at producing goods(more productive)
          • Increased productivity causes production to become cheaper per good
          • Production levels increase
    • Money
      • Medium of exchange: money is used to exchange for goods and services
      • Unit of account: Money is used to determine the value of goods/services. This is monetary value (or unit of account)
      • Store of value: Money which is stored over time. The money stored (e.g. in a bank) would have kept its value.
      • Means of deferred payment: Money can be loaned (means of deferred payment) even if the borrower does not have the sufficient money.


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