What is the economic problem? What are they?
Limited factors of production.
Capital, enterprise, land, labour
What do we consider when we choose?
- What’s best to produce?
- What do we want more/less of?
- Who do you produce for?
- How do we produce efficiently?
What is the opportunity cost?
The next best alternative forgone.
What are the factors of production when the output is crisps?
Capital= Tractors, machinery
Enterprise= Walkers
Land= Farm land, land for factories
Labour= Farm/ factory workers
What does scarcity?
Short supply
What does need mean?
Something you must have, in order to survive or to do something?
What does unlimited wants?
Someone always wants something else.
What is the definition of factors of production?
Inputs used to produce a good or service in order to produce income.
What is the basic economic problem?
Scarcity of resources in relation to the unlimited wants and needs of individuals and societies.
What is specialisation?
Process where in a company or individual decides to focus their labour on a specific type of production.
What is interdependence?
Situation where two or more parties depend upon each other for the exchange of goods and the fulfilment of their necessities.
What is a mixed economy? Example of country?
Goods and services are allocated by businesses and consumers but also by the government in some cases.
- UK
What is a command economy? Example of country?
Government/ state choose how much to give. Resources are allocated by government/ state. Everyone works for the sate.
- Used to be Russia
- North Korea
What is a free market economy? Example of country?
Allocation of resources id decided by firms or businesses, consumers (Supply and demand)
- No free market
-USA is closer to free market than UK is.
What are the economic agents? What are the 3 agents?
Players in the economy, groups that influence resource allocation.
- Firms/ producers
- Consumers
- Government
What are the objectives of firms/ producers?
- Persue profit/ want profit
- Respond to demand
- Producers use less resources to create more profit.
What are the objectives of consumers?
- Want utility/ enjoyment/ use
- Weigh up the utility to the price.
What are the objectives of the government?
- Want good social welfare
- E.g. low unemployment
How does the government intervene in the UK?
- Subsidise
- Provision
- Legislation/ law
- Information
- Tax
- Setting price- max/min
What does a Production Possibility diagram show?
Shows the maximum possible output that can be achieved with the given resources.
What does a PPC show?
- Different combinations of goods and services that can be produced with a given amount of resources.
- No “ideal point” on the curve.
- Any point inside the curve- suggests resources are not being utilised efficiently.
- Any point outside the curve- not attainable with the current level of resources
-Useful to demonstrate economic growth and opportunity cost.
Why does the curve go outwards?
If the quantity or quality of factors of production increases.
Why does the curve go inwards?
When the productive potential is lower, less resources.
- War, lack of investment, recession, natural disaster, famine.
What does a point on the curve mean?
Efficient
