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economics - IGCSE
Ch1&2 - the economic problem and economic assumptions
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Cards (18)
Unlimited wants
People's desire for goods and services
e.g. more
holidays abroad
, a
better house
, a
bigger car
,
better education
,
improved health care
Finite (limited) resources
Resources that are
scarce
or
limited
Needs
Basic requirements
for human survival include
water
,
food
,
warmth
,
shelter
and
clothing
Wants
People's
desire
for
goods
and
services
e.g. more
holidays abroad
, a
better house
, a
bigger car
,
better education
,
improved health care
Basic economic problems occur because the world's resources are
scarce
or
finite
and people's wants are
infinite
Demand for resources is
greater
than their supply
Decisions that have to be made to overcome economic problems
1.
What to produce
?
2.
How to produce
?
3.
For whom to produce
?
Opportunity cost
The
cost
of the next best
alternative
given up
Capital goods
Those purchased by
firms
and used to produce other goods such as
factories
,
machinery tools
and
equipment
Consumer goods
Those purchased by
household
such as
food
, car,
tablets
confectionery
Production possibility curves (PPCs)
Show the different
combinations
of
two goods
that an
economy
can
produce
if
all resources
are
used up
Reasons for economic growth
New technology
Improved efficiency
Education
and
training
New resources
If PPC shift inwards
This would represent
negative economic growth
(where a country's
productive potential
actually
falls
)
Reasons for negative economic growth
Resource depletion
Adverse weather patterns
Skilled workers moving overseas
Underlying economic assumptions are that consumers aim to
maximise their benefit
and businesses aim to
maximise their profit
Reasons why consumers may not maximise their benefits
Consumers are not always good at
calculating their benefits
Consumers have
habits that are hard to give up
Consumers sometimes
copy others' behaviour
Reasons why producers may not maximise their profit
Producers may have managers that
revenue maximise
or
sales maximise
Producers may
prioritise caring for customers
Producers may
complete charitable work
Production possibility curves (PPCs)
Show the maximum quantity of goods that can be produced
A)
outside PPC curve
B)
negative economic growth
2