Chapter 2: The economic problem

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  • Created by: Asiyah N
  • Created on: 27-07-16 15:33
The Economic Problem
Only a limited amount of resources are available to produce the unlimited quantity of goods and services
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A production possibility diagram
Shows different possible combinations of goods that can be produced using available resources
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Consumer good
Such as food or an ipod, is used by consumers to meet their needs or wants
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Capital good
such as a machine, is used to produce other goods, including consumer goods
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Technical progress
Improves methods of producing existing goods and enables completely new types of good to be produced
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Opportunity cost
Tthe cost of the next best alternative sacrificed
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Finite resource
A Resource, such as oil, which is scarce and runs out as it is used
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Free good
A good, such as air, for which there are no costs of production and no scarcity
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Renewable resource
A resource, such as timber, that with careful management can be renewed as it is used
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Production
A process, or set of processes, that converts inputs into outputs.
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Factors of production
Inputs into the production process, such as land, labour, capital and enterprise
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Command economy
The planning mechanism allocates resources between competing uses
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Market economy
Markets are prices allocate resources between competing uses
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Capitaism
The means of production are privately owned
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Socialism
The means of production are socially owned
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Mixed economy
Contains both market and non-market sectors and a substancial public sector as well as a private sector
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Other cards in this set

Card 2

Front

Shows different possible combinations of goods that can be produced using available resources

Back

A production possibility diagram

Card 3

Front

Such as food or an ipod, is used by consumers to meet their needs or wants

Back

Preview of the back of card 3

Card 4

Front

such as a machine, is used to produce other goods, including consumer goods

Back

Preview of the back of card 4

Card 5

Front

Improves methods of producing existing goods and enables completely new types of good to be produced

Back

Preview of the back of card 5
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