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Fundamental
FUNDAMENTAL Economic Problem
ECONOMIC PROBLEM
Scarce resources relative
to unlimited wants.
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, Resources
RESOURCES Inputs available for
production of goods &
services.
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, Wants
WANTS Needs that aren’t always
met.
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4v9
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, Scarcity
SCARCITY Occurs when needs &
wants are in excess of
currently available
resources.
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, Opportunity Cost
OPPORTUNITY
COST Is the forgone benefit
that would have been
derived by an option not
chosen.
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, Factors of Production
FOP Anything that is useful in the
production of goods and
ser vices.
May be classified as follows:
Land – The natural
resources in an economy.
Labour - The human
resources available in an
economy.
Capital– A man-made aid to
production.
Entrepreneur - Organises
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production and is willing to
take risks.
By JayIlda As Flashcards
, Forecasting
FORECASTING The act of making informed estimates
of future trends.
T y p e s o f F o r e c a st:
• St atiscal F o r ecast - Based on
s i m p le / c o m p le x d e d uc t i o n t e c h n i que s .
• R a n g e o f f o r e c a s t – In vo lvi n g m o d e ls o f
e c o n o m y w i t h c o m p le x i n t e r r e la t i o n s h i p s .
• I n t ui t io n F o r e c a s t - B a s e d o n i n t ui t i o n o r
g ue s s w o r k , t h e r e ’s n o us e o f s t a t i s t i c s .
F u r th e r C l a ssif i ca ti on o f F o r e c a sts
• Short Rang e <3 m o n t h s .
• M e d i um R a n g e 3 mo n t h s – 3 ye a r s .
• Long R ang e >3 ye a r s .
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, Capital consumption
INVESTMENT Capital required to
replace that which is
worn out.
Investment
Creation of capital
goods.
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, DIVISION Division of Labour
OF LABOUR When a manufacturing
process is split into a
sequence of individual
tasks
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, Specialisation
SPECIALISATION Process by which
individuals , firms and
economies concentrate on
producing goods and
ser vices where they have a
Absolute⁶⁰ or Comparative⁶¹
Advantage over others.
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1 By JayIlda As Flashcards
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