What is the basic economic problem?
The mismatch of unlimited wants and needs and limited economic resources.
What does scarcity mean?
The inability to satisfy all wants at the same time; limited resources.
What are economic choices?
Choices between different alternatives or possibilities.
What are free market economies and why can't they exist?
In free market economies, there is no governmental intervention. All countries have a legal system which is a form of governmental intervention, therefore there cannot be a situation where governmental intervention seizes to exist.
What is meant by capital as a mean of production?
Capital can mean physical capital or human capital. Physical capital includes all the infrastructure needed for the manufacturing of goods and services.
What is meant by labour as a mean of production?
The value of human capital, e.g. the health, skills and efficiency of the workers.
What is meant by a free good? How do free goods differ from economic goods?
Free goods are resources that are not scarce and do not have an opportunity cost.
What are the four types of means of production?
Land, capital, labour and entrepreneurship.
What is the PPC curve and what does it tell us?
Production possibility curve tells the maximum production possible, assuming that an economy is able to utilize its resources as efficiently as possible.
When does the PPC curve shift outwards?
When economic growth occurs.