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17 Cards in this Set
- Front
- Back
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What is a need? |
A need is an essential item |
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What is a want |
This is a desirable item- which however constantly changes |
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What is an economy? |
This is an area of production, distribution, trade and consumption of goods and service by different agents in a given location |
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What is the basic economic problem? |
The fact that resources are scarce, and wants are infinite as there is no limit to how much individuals are capable of wanting. |
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What is meant scarcity of resources? |
There is not enough resources and so at insufficient for demand |
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What is opportunity cost? |
This is where you have given up the next best alternative |
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What is an example of opportunity costs? |
When you have money and you want to buy 2 things and you pick one of them. The other item has cost you the opportunity. |
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What does opportunity cost depend on? |
Benefit and costs |
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Why has it cost you the opportunity? |
This is due to scarcity of resources- therefore we have to make choices on how to maximise our utility |
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What is misallocation of resources |
This is when resources are not used or distributed efficiently leading it market failure |
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What is market failure |
This is when the market has failed to do its job properly |
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What is a production possibility frontier(PPF) |
Shows different combinations of economic goods which an economy is able to produce if all resources are fully used and efficiently employed |
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What are capital goods |
Goods which are used in making products- allows the economy to grow |
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What is the law of diminishing returns? |
This occurs in a production process- as one input variable is increased there will be a point at which the other unit of output will start to decrease holding all other factors constant |
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What does a point anywhere on the PPF represent |
Any point on the pff represents a possible combination of products when all resources are efficiently used |
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What does B represent on the PPF |
More capital goods and less consumer goods are being produced- it is giving up(opportunity cost) of making more consumer goods |
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What does it represent when the cross is in the centre of the curve |
It is at its maximum point of production all resources are efficiently employed and is not giving up anything |
