Are finite in supply and the rate of extraction of finite resources depends on the current market price.
What are examples of non renewable resources?
Crude oil
Coal
Natural gas-methane
Fossil fuels
What is specialisation?
Occurs when an individual/firm concentrates on producing certain goods and services, and trading any surplus with others.
What is division of labour?
A from of specialisation where the tasks needed to produce an item are divided among workers at an individual level.
What is a production possibility curve (PPC)?
A graph that shows the maximum possible combinations of two goods that can be produced and achieved in an economy with given resources and technology (efficiently employed).
What can a PPC show?
A PPC can also show the maximum potential output combination of two goods that a firm can achieve when it uses all its resources efficiently.
When will a PPC shift outwards?
A PPC will shift due to:
A gain in more factors of production- quality improves
When there is economic growth
What is the law of diminishing return?
The idea that marginal (extra) output of consumer goods diminishes as more factor resources are allocated to it.
What is resource depletion?
The decline in the total stock of resources available.
What are examples of resource depletion?
Climate change
Low rates of investment
What are the causes of an outward shift in a PPC?
Higher productivity/efficiency of factor inputs
Increase in stock of capital and labour supply
Innovation and invention of new products and resources
Resources/extraction of new raw materials
Advances in technology
What causes an inward shift in a PPC?
War
Natural disasters
Trend towards early retirement
Net migration of people out of a country rises
What is the cause of an inward shift in a PPC?
Caused by a fall in the productive potential of a country
Decrease in the factors of production
What is a mixed economy?
Where both the free market mechanism and the Government planning process allocate significant proportions of total resources.
what is a planned/command economy?
An economic system where resources are state owned (Government) and are allocated centrally to maximise social welfare.
What are agents in a mixed economy?
Government
Producers
Consumers
Owners of the factors of production.
Agents in a mixed typically supply public and merit goods.
State will intervene in markets to correct market failures.
The mix will change over time as some industries are privatised or nationalised.
In a planned/command economy:
Price controls may exist
Workers work for a wage difference-given jobs by the Government
Output decisions taken by a planning committee
Goods are allocated through rationing
Market prices don't inform resource allocation.
What are 6 benefits of a planned/command economy?
Low income inequality
Security provided by the state
Full employment
Adequate provision of public and merit goods
Possible environment protection
National interest rather than individual profits
What are 5 negatives of a planned/command economy?
Low product quality-no profit motive
Low choice/variety for consumer- no competition
Needs a large bureaucracy
Little innovation or invention-no profit motive
Corruption may develop-shadow economy.
What is a market economy?
Where resources are allocated by the market mechanism of demand and supply.
What are 3 benefits of a market economy?
Invisible hand allocates resources-allocative efficiency
Innovation and productive efficiency
Choice and variety due to competition.
What 4 negatives of a market economy?
High levels of income inequality
Production of demerit goods
Pollution and environmental damage
No public goods and unfair supply of merit goods.
What is a need?
Things we need to survive; essential for life.
What is a want?
Things we would like to have, irrespective of whether you have the resources to pay for it.
What are the factors of production?
The resource inputs that are available in an economy for the production of goods and services.
What are 2 benefits of specialisation?
Can use its factors of production in the most efficient way-productive efficiency increases.
Products not normally available can be exchanged fro products produced in another.
What are 5 drawbacks of specialisation?
Economies based on producing finite resources will suffer-run out
Boring work-high levels of staff turnover
Demand may fluctuate-unemployment
Change in consumer tastes-harms exports if no longer needed