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17 Cards in this Set

  • Front
  • Back

What is a need?

A need is an essential item

What is a want

This is a desirable item- which however constantly changes

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

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.

What is meant scarcity of resources?

There is not enough resources and so at insufficient for demand

What is opportunity cost?

This is where you have given up the next best alternative

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.

What does opportunity cost depend on?

Benefit and costs

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

What is misallocation of resources

This is when resources are not used or distributed efficiently leading it market failure

What is market failure

This is when the market has failed to do its job properly

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

What are capital goods

Goods which are used in making products- allows the economy to grow

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

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

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

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