1.1.3: The Economic Problem
Cards (12)
- The economic problem: People have infinite wants, but there are finite resources
- Economists try to solve the economic problem by working out what to produce, how to produce it and for whom to produce for
- Renewable: A resource which can be replenished or replaced on a level equal to consumption
- Non-renewable: A resource which cannot be replaced by natural means on a level equal to consumption
- The opportunity cost is the next best forgone alternative
- Consumers choose how to use their limited income based on what satisfies them the most. Producers produce what will give them the most profit
- Land: All natural resources used in production e.g raw materials, land and minerals
- Labour: All productive human effort, both physical and mental, paid and unpaid
- A worker's value is called their human capital
- Capital: All man-made resources used to produce goods or services in the future
- Entrepreneurship: Willingness and ability to take the risks of combining the other factors of production to make a product or service
- Rewards for each factor of productionLand: RentLabour: WagesCapital: InterestEntrepreneurship: Profit