The economic problem the nature and purpose of economic activity

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  • Created by: Caitlin
  • Created on: 27-03-13 21:20

The Nature and Purpose of Economic Activity

  • PURPOSE  -  to produce goods and services to satisfy needs and wants establishing economic welfare.
  • ECONOMIC WELFARE - the measure of happiness within an economy - economic welfare and activity are difficult to measure as some activity not recorded e.g. housework, black market.
  • 3 MAIN QUESTIONS -
    • WHAT to produce ?
    • HOW to produce it ?
    • For WHOM to produce it ?
  • ECONOMIC PROBLEM :
    • LIMITED RESOURCES to meet UNLIMITED WANTS
  • 3 types of economy
    • Market - the price mechanism performs task of allocating scarce resources among competing uses.
    • Mixed - it contains both market and non-market sectors and a substantial public sector as well as a private sector, government may intervene.
    • Command economy - government decides on the production of goods and services.
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Economic Resources

FACTORS OF PRODUCTION - INPUTS INTO PRODUCTION PROCESS - CELL

  • Capital - used to assist production of other goods. E.g machinery.
  • Enterprise - e.g entrepeneur - the person who addresses issues such as what, for whom & how to produce. They decide how much land, labour and capital are needed. They are risk takers and decision makers motivated by profit.
  • Land - all natural resources. e.g medows. Also includes minerals such as coal, gold, agricultural crops and livestock.
  • Labour - Human effort both physical and mental, used in the production of goods and services. Do not confuse with enterprise a bank manager is not an entrepeneur because he is not risking his own capital.

Four of the production factors displayed in a diagram. These are: entrepreneur, land, labour and capital. (http://www.bbc.co.uk/bitesize/higher/business_management/images/production.png)

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Comments

Robertmayerscott

Report

The development of scientific thought, the introduction of digital technology and artificial intelligence has led to fundamental changes in economic relations. The emergence of the digital economy is a public policy priority for most economically developed countries, according to the site. Blockchain and cryptocurrency involve transactions between counterparties without the intervention of any third party. Cryptocurrency transactions do not require an intermediary, unlike traditional money, transactions are decentralized.

In the first half of 2021, there have been developments that indicate the acceptance of bitcoin as an alternative asset class. For example, Tesla conducted a cryptocurrency transaction, buying $1.5 billion in bitcoins in February and selling 10% of the digital coins at the end of March.

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