Economics 1.1: The Basic Economic Problem Essay

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What is the basic economic problem?
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Human wants are unlimited but resources are scarce
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Resources are need to produce ______ and _______
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Goods and Services. a.k.a food is a good, hairdressing is a service
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Define production
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Using resources to make and sell goods and services to satisfy consumer wants
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What is the input and output in production/productive activity
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The input are resources to productive activities, and goods and services are the outputs or products
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What are the factors of production? Give examples for each
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Capital: Machinery, capital goods, and finance, man made resources Enterprise: A firm, or entrepreneurs to combine the factors of production, who have the business know-how, to run and organize the production process Labor: Human resources, manual labor, provide physical and mental effort Land: Natural resources-seas, rivers, minerals, forests, deserts, chemicals/gases from the air, fertile soil, coal/oil, and animals
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What is a free good?
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Resources that are not scarce, such as air (but it isnt quite because as pollution rises etc)
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What is a basic need?
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A need is an essential good, that we need for survival, such as clean water, food and shelter
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What is consumption?
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Using up goods and services to satisfy our needs and wants
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What are the people that buy goods and services called and what is their spending?
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Consumers, consumption expenditure
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What is exchange in the modern economy?
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In order to obtain goods and services they can’t produce themselves, like crops for a normal city goer, they must engage in trade/exchange by going to work to earn money, then exchanging this money for g and s.
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What is a consumer good, and what are the sub types
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Consumer good is a good that satisfies consumers wants. Consumer durable good: A good that lasts a relatively long time, a.k.a car, furniture, computer Non-durable good: Goods that perish quickly, food, drinks, matches
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What is a consumer service?
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People doing stuff for us like medical services, health care, police
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What are capital goods? Why are they known as investments?
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Goods that used in production to make other goods, usually tools and machinery like screwdrivers. Or roads, power stations and factory buildings. They;re known as investments bc firms can use them to produce g and s and it will help increase production + help the economy grow
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What is a public good?
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Its a non excludable good, you can’t stop people from benefiting from it even if they don’t pay. They’re provided by the government because everyone benefits from them but people might not pay for them, and no private firm wants to produce these goods because they;re unprofitable.
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Examples of public goods
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Street lighting, the police, law and order, defense-public sector stuff
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What are Merit goods
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Goods and services that the government provide for free to consumers as they think that consumers will benefit from them, and to benefit the economy. Such as healthcare and education.
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How are public goods and merit goods payed for?
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TAX from people’s incomes. We’re the tax payers
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What economic problem is choosing how resources are used related to
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Scarce resources have alternative uses, or opportunity cost
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What is opportunity cost?
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The benefit of the next best alternative foregone. There will always be a conflict of interests as some group of people won’t get what they wanted.
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An example of opportunity cost
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In everything from buying goods and services to allocating resources. A plot of land could be used for farming by a company which could have been used for building a new school. the benefit foregone is the children’s education or whatever
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What is a production possibility curve look like, and what does it show
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Its an outward bending curve sloping downwards. The combined maximum output of two products or groups of products a firm or an economy can produce efficiently with existing resources and technology. How much of two things a company can produce.
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Why do some people have greater choice?
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Usually, people in MEDC’s, with higher incomes have access to more available resources in their countries

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