Economics : The Basic Economic Problem
What does a PPC show?
A PPC shows the combinations, or choices facing an economy.
What is a PPC?
A mile model of an economy where there are only two goods being produced.
What is a need?
A need is anything that is necessary for survival.
What is a want?
A want is anything that is not necessary for survival and enhances our standard of living.
What are Consumer non-durable goods?
Can only used be once
What are the two types of goods?
Consumer and capital
What does PPC stand for?
Production possibility curve
Which are economic goods?
Renewable and non-renewable goods.
What is a resource?
Resource can renewable, non-renewable or free.
What is Working Capital?
Stocks or raw materials that can only be used once in production and
What are Goods?
Tangible items.
What is the Basic Economic Problem?
The basic economic problem of scarcity arises because of infinite wants and finite resources.
What is opportunity cost?
The cost of not choosing the next best alternative.
What makes people choose things?
The fact that there are not enough fresources to suffice people wants.
What is Enterprise?
The factor that is responsible for risk and combining the factors of production.
Why are wants unlimited? (4)
Wants are unlimited because humans are greedy. more goods and services are being invented and developed. Advertising informs and persuades us. Goods wear out over time.
What are the three main questions economics answers? and what type of decisions are these?
What to produce is a consumption decision. How to produce is a production decision. For whom is a distribution decision.
What assumptions made when drawing the curve on a PPC?
All the resources/factors of production are being used. The most advanced technology is being used.
What are economic resources also known as?
Factors of production.
What are Capital Goods?
Goods that are used to assist in production of other goods
Name three types of Capital Goods.
Goods that assist in production.of other goods.
What is Fixed Capital?
Goods that can be used more than once and depreciate a little every time you use it.
What are Consumer durable goods?
Goods that satisfy wants more than once.
What are Consumer goods?
Goods that satisfy wants when they are used
Who makes decisions on what?
Individuals, firms and governments make decisions on opportunity cost.
What does a PPC illustrate?
It illustrates that in order to have more of one good you have to have less of another.
What does opportunity cost measure?
It measures the benefit you could of have had from the next best alternative.
What do the factors of production produce?
Land produces rent. Labour produces wages. Capital produces interest. Enterprise produces profit.
What is Capital?
Man-made goods that assist in production of gods and services.
What is Labour?
The human input into production by brain or body, skilled or unskilled.
What is land?
The natural resources used in production.
What is production?
The transformation of resources and factors or production into goods and services.
In economics, what do we assume about Firms?
They aim to maximise their profits.
In economics, what do we assume about Governments?
They aim to maximise their social or economic welfare.
In economics what do we assume about individuals?
They aim to maximise their utility.
