Level 2
Level 1

Unit 1 - The Economic Problem


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Economic Problem
The issue of scarce resources and unlimited wants
Factors of Production
The resources available to produce goods and services
Labour
One of the factors of production - it is the human input into the production process
Land
One of the factors of production - it includes land itself and all the natural resources on and below land
Capital
One of the factors of production - it refers to goods that are used to produce goods and services
Enterprise
One of the factors of production - enterprise is having ideas and taking risks in setting up or running a business
Primary Sector
Where the extraction of raw materials take place
Secondary Sector
Where raw materials are manufactured into goods
Tertiary Sector
The service sector
Opportunity Cost
The next best alternative foregone when making a choice
Market
Where buyers and sellers meet to exchange goods and services
Market Economy
Where all resources are allocated by private individuals and groups
Planned Economy
Where all resources are allocated by the government
Mixed Economy
Where some resources are allocated by the government, and other resources are allocated by private individuals
Public Sector
The government sector of the economy, where organisations are owned and run by the government
Private Sector
The sector of the economy where firms are owned and run by private individuals and groups - their main aim is profit maximisation
Specialisation
Individuals, firms and countries specialise in what they are best at in order to produce a surplus that can be traded
Functions of Money
A medium of exchange, a unit of account, store of value and means of deferred payment