IGCSE Economics Unit 1

choice and the allocation of resources

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Factors of Production
Resources used in production. They include: LAND LABOUR CAPITAL ENTERPRISE
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Land (FoP)
All natural resources used in production
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Labour (FoP)
All the physical and mental contributions provided by people
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Capital (FoP)
Human-made resources used in the production of other goods and services
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Enterprise (FoP)
The factor that combines and organises the other factors of production to produce goods and services. (Takes the risk and gets the reward, ie.profit)
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Economic Problem
There are unlimited wants and limited (scarce resources). Not enough resources to satisfy our needs and wants
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As a resource becomes more scarce...
The price goes up
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Needs
The things that are essential for people to live
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Wants
The luxuries that people desire to make their life more comfortable
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Production
Making goods and services from resources
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Producers
People/Firms that make goods and services to satisfy consumers' needs and wants
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Consumers
People/Firms that need and want goods and services
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The government acts as...
A producer, consumer and a law-maker
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Consumption
The using up of goods and services by consumers to satisfy their needs and wants
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Durable Consumer goods
Goods that last a long time eg. furniture
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Non-durable consumer goods
Goods that are used up quickly eg. food (perishable goods)
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Consumer services
Services provided to the consumer, 1)Personal services such as hairdressing, dentistry. 2) Leisure services such as holiday companies and cafes
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Capital Goods
Goods used by firms to produce other goods and services eg. shops, vans, machinery
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Semi finished goods
Goods that are component parts used in the production of other products, eg. memory chips, buttons for clothing.
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Business Services
Services provided by other businesses such as insurance, banking, advertising etc.
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Opportunity Cost
The next best alternative given up when we make a particular choice. The alternative that is scarificed is the "real" cost of making a choice.
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Opportunity cost is not a number of possible alternatives that have been given up...
It is specifically in terms of the NEXT BEST ALTERNATIVE that has been given up
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If we overlook opportunity cost, this can lead to...
undervaluing and as a result, overusing important resources.
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Decisions made by producers that involve opportunity cost...
What to produce; opportunity cost is the next best good/service that could be produced. Where to produce; the opportunity cost is the advantage sacrificed from setting up elsewhere, eg. wage costs, labour with right skills etc.
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Opportunity Cost of pollution...
The cleaner environment that would otherwise exist. Cleaning up the effects of pollution costs momey which could lead to an increse in proces charged by a firm.
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Opportunity cost in government spending...
Applied to decisions to spend on different government ministries, eg. Defence, Healthcare, Education etc. If more money is spent on one, you have sacrificed money from another and so on. Need to explore implications.
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When analyzing opportunity cost...
Analyze the pros and cons of decision made, analyze pros, cons and implications of next best alternative that was foregone.
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Other cards in this set

Card 2

Front

All natural resources used in production

Back

Land (FoP)

Card 3

Front

All the physical and mental contributions provided by people

Back

Preview of the back of card 3

Card 4

Front

Human-made resources used in the production of other goods and services

Back

Preview of the back of card 4

Card 5

Front

The factor that combines and organises the other factors of production to produce goods and services. (Takes the risk and gets the reward, ie.profit)

Back

Preview of the back of card 5
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