Scarcity and choice

• What is scarcity?

  Wants are unlimited but resources are limited- the basic economic problem
• What are factors of production?

  the resources people use to produce goods and services
• What is land?

  All natural resources such as coal, soil, the sea etc. Owners receive rent.
• What is labour?

  Describes workforce of the economy. Owners recieve a salary
• Whatis capital?

  Physical assets or man made resources used in production. Owners recieve interest
• What is enterprise?

  Decision making and risk factor. Owner hopes to receive profits
• What are factor rewards?

  Income earned by the owners of the factors of production
• What is opportunity cost?

  The satisfaction lost from the next best alternative foregone
• What are economic goods?

  Goods that have an opportunity cost
• What are free goods?

  A good that has no opportunity cost
• What is the production possibility frontier?

  Curves show the maximum amount of a good that can be produced given a certain amount of another good, when all resources are being fully utilised
• What is privatisation?

  The transfer of resources from the public sector to the private sector
• What is nationalisation?

  The transfer of resources from the private sector to the public sector
• What is an economic agent?

  Individuals, firms and organisations
• What is the public sector?

  The part of the economy owned and controlled by the state/ government
• What is the private sector?

  The part of the economy owned and controlled by private individuals and organisations
• What is positive economics?

  Dealing with the objective or scientific explanations of the working economy
• What is normative economics?

  Dealing with the recommendations based on personal value judgements
• What is constant opportunity cost?

  Sacrifice the same number of units to obtain the same number of another product
• What is economic growth?

  An increase in the capacity of the economy
• What is the cause of growth?

  Increase in the quantity or quality of the factors of production
• What is economics?

  The study of how resources are allocated
• What is microeconomics?

  The branch of economics which considers the behaviour of decision takers within the economy, such as firms, individuals and households
• What is the economic problem?

  scarcity- wants are unlimited but resources are limited
• What is an entrepreneur?

  Person who sets up the business and takes on risks by coordinating factors of production
• What is a want?

  Things that are desired
• What are needs?

  things that are necessary to survival
• What is an economy?

  a system that seeks to deal with the basic economic problem and allocate scarce resources
• What is a market economy?

  resources are allocated through the price mechanism, without government interference
• What is the command economy?


  all resources beling to the state; there is no freedom of ownership
• What is a mixed economy?

  Some resources are allocated by the government and the rest by the market system
• What is a susbistence economy?

  each individual produces enough to survive and meet their basic needs
• What is specialisation?

  a situation where individuals or firms or regions or nations concentrate on producing a small range of goods or services
• What is division of labour?

  Occurs when the production process of a good or service is divided into a number of individual operations and each operation os the special task of one worker
• What is trade-off?

  A situation where making one choice means losing something else, usually foregoing a benefit or opportunity
• What is exchange?

  Overcomes the need for the double coincidence of wants by trading money for items
• What is productivity?

  How much output can be produced with. given set of inputs
• What is rational behaviour?

  Decision making process based on making choices that result in the optimal level of utility for an individual
• What is capital intenisve?

  Capital is the highest proportion of costs- the production process involves more machinery than labour
• What is labour intensive?


  labour is the highest proportion of the costs- the production process involves more labour than machinery