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11 Cards in this Set
- Front
- Back
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Nature of the economic problem |
The fundamental economic problem arises due to scarcity . Scarcity is when there are insufficient resources to satisfy everyone’s wants and need. Finite resources and unlimited wants |
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Factors of Production |
Land Labor Capital Enterprise |
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Land |
Natural occurring resources used for production purpose. Examples: • Earth on which mills are built • Water in which fish is found • Raw materials used to produce goods |
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Labour |
Manual and mental effort to produce or deliver goods and services. People who are willing or able to work are known as labour work force. Examples: • Clerks • Computer technician • Economics Teacher |
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Capital |
Manmade goods to produce other goods and services. Capital is classified into capital goods and consumer goods . Examples: • Machines • Factories • Roads |
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Enterprise |
The people who bring the other 3 factors of production together to produce goods and services are called entrepreneur. In this process they do the decision making and risk taking. |
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Opportunity cost |
The next best alternative foregone when a choice is made. Opportunity cost is never in money value. Opportunity cost is the benefits which could have been received by taking an alternative action. |
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Circumstances where opportunity cost is present |
Opportunity cost and consumers Opportunity cost and workers Opportunity cost and producers Opportunity cost and government |
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Opportunity Cost Situations |
Ali can buy a ball or a pen. He decides to buy the pen. The opportunity cost of buying the pen is ball. Rahul can buy a 1 cd or a burger meal. He decides to buy 1 cd. The opportunity cost of buying 1 cd is burger meal |
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Opportunity Cost Situations |
The government of china can either spend $2 million on roads or computer technology. It decides on spending on roads. The opportunity cost of the building the road is computer technology |
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Production possibility curve (PPC) |
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