- Created by: alyshawn
- Created on: 16-02-19 13:41
The Economic Problem is caused by scarcity.
Scarcity occurs when there are not enough factors of production to satisfy people's unlimited needs and wants.
The factors of production are:
Unlimited wants + Limited resources = Scarcity
Land is all of the natural resources provided by nature:
- Mineral resources
Labour is the people involved to make the products. They can be skilled, semi-skilled or unskilled:
Capital is the finance, machinery and equipment needed to manufacture goods:
Enterprise is the skill and risk-taking factor of production. They will bring all the other factors together to produce goods and services:
- Owner of the business- Entreprenuer
Since there are limited resources, we are required to make decisions. This leads us to having an opportunity cost.
The opportunity cost is the best alternative sacraficed.
For an individual, mostly luxuries
- Holiday or Car?
For a business, mostly capital
- Machine A or Machine B?
For the government, mostly for society
- New Road or New School?
Specialisation is when people and businesses concentrate on what they are best at. Using specialised machinery makes work more efficient. Living standards are bound to increase when becoming specialised.
Division of Labour is when the production process is split up into different tasks. It is a form of…