Chapter 2: The economic problem 0.0 / 5 ? EconomicsThe Economic ProblemASAQA Created by: Asiyah NCreated 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 1 of 16 A production possibility diagram Shows different possible combinations of goods that can be produced using available resources 2 of 16 Consumer good Such as food or an ipod, is used by consumers to meet their needs or wants 3 of 16 Capital good such as a machine, is used to produce other goods, including consumer goods 4 of 16 Technical progress Improves methods of producing existing goods and enables completely new types of good to be produced 5 of 16 Opportunity cost Tthe cost of the next best alternative sacrificed 6 of 16 Finite resource A Resource, such as oil, which is scarce and runs out as it is used 7 of 16 Free good A good, such as air, for which there are no costs of production and no scarcity 8 of 16 Renewable resource A resource, such as timber, that with careful management can be renewed as it is used 9 of 16 Production A process, or set of processes, that converts inputs into outputs. 10 of 16 Factors of production Inputs into the production process, such as land, labour, capital and enterprise 11 of 16 Command economy The planning mechanism allocates resources between competing uses 12 of 16 Market economy Markets are prices allocate resources between competing uses 13 of 16 Capitaism The means of production are privately owned 14 of 16 Socialism The means of production are socially owned 15 of 16 Mixed economy Contains both market and non-market sectors and a substancial public sector as well as a private sector 16 of 16
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