In a simple economy the producer consumes his own product (a hunter catching a fish). The curve itself is the potential output while anything inside is attainable.The ultimate aim of all factors of production is consumption. Durable goods are consumed over time.Ī market is somewhere where goods and services are bought and sold.Ī Production Possibility Curve/Frontier (PPF/PPC) is used to show all the possible combinations of two goods/services that can be produced within an economy. Goods are tangible products and can be split into durable and non-durable goods.
#4 factors of production and definitions free
The authority decides the answers to the three economic questions.Ī transitional economy is one in transition between a command and free market system. Market forces decide the answers to the three economic questions, what, how and for whom to produce.Ī centrally planned/command economy is one in which resource allocation is determined by a central authority/government agent. Opportunity cost is the cost of the next best alternative forgone.Ī free good is one which is not scarce, has no opportunity cost and therefore no price.Īn economic good is one which is scarce and therefore has an opportunity cost and price.Ī free market is one in which resource allocation is determined by market forces (demand and supply). Utility is the satisfaction gained from the consumption of a product. It is in return for interest.Įnterprise takes the risk and combines the other factors of production. It is in return for wages.Ĭapital is any man made assistance to existing wealth/capital. Labour is the human component of the production of a good. Land is the gift of nature, everything on, under, above or in the land/sea. These are the resources necessary to create goods and services in an economy. Scarcity is the result of no resources being infinite, whereas the want of them is.įactors of production include land, labour, capital and enterprise.
Sustainable development is development that meets the needs of today without compromising the needs of tomorrow.Ĭeteris paribus is Latin for all other things being equal. Normative statements are opinion based and biased.
Positive statements are based on facts or evidence so can be proven or disproved using a scientific approach. It is a qualitative measure, taking into account factors like education and health. Potential output is the highest possible level of output that can be sustained over the long term.ĭevelopment is an increase in the standards of living. GDP/National Income is the value of all final goods and services produced within an economy in a given time period. Growth is an increase in economic activity. Macroeconomics is the study of the economy as a whole.It is the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity. Microeconomics is the study of individual economic units such as households and firms.
A social science is a study of society and the way individuals interact within it.Įconomics is a social science, and is the study of how society employs finite resources in order to satisfy infinite wants.
0 kommentar(er)
