Economics Unit 1 - Card 1
The Central Economic Problem
Defintion: "The economic problem is that only a limited amount of resources are avilible to produce the unlimited quantity of goods and services people desire."
Resources are finite
Incomes are limited
Choices have to be made
Factors of production: Land, Labour, Capital and Enterprise.
Land: Land itself as well as ALL the goods extracted from the world
Reward or payment is rent.
Renewable resources - able to be replenished over time
Non-renewable resources - likely to run out
Labour: Includes all the potential workforce; the physical people and their skills/abilities/intelligence
The reward or payment is wages
Economics Unit 1 - Card 2
Capital: The stock of goods used to make other goods and services
Capital goods (^) Capital - money
Firm needs capital (money) what its spent on is the capital
The reward or payment is interest
Enterprise: The risk takers, the "movers and shakers" that organise/make production happen.
Catalysts for action because they take risks
The reward or payment is profit.
National economy must make choice, use resources avilable to produce:
1. Consumer goods
Enable consumers to meets needs and wants
EG: Washing machine/iPod (Durable)
Known as Final Goods
Purchase of these is Consumption
Economics Unit 1 - Card 3
2. Capital Goods
Used to produce other goods
EG: A machine to produce plastic bottles
Raw materials eg: Oil
Purchasing of these is Investement
PPF shows maximum possible output that can be achieved
More capital goods = faster economic growth this means less consumer goods produced
Not all resources being used = shrinking PPF
Productive efficiency = Firm operates at min. average total cost, producing max. possible output from inputs - Not doing this would be wasting resources.
Any point on the PPF boundary is productively efficient.
Opportunity Cost: The cost of the next best alternative sacrificed or foregone
To operate on the PPF boundary increasing output of one type of a product, reducing output of another is necessary.