Factors of Production
What are the four factors of production?
Land, Labour, Capital, and Enterprise.
Name one sector in the 5-sector circular flow model.
Households, Firms, Government, Financial Sector, or Overseas Sector.
What does a PPC show?
The maximum combination of two goods or services an economy can produce using available resources.
Name one type of economic system
Market, Command, or Mixed/Modified economy.
What is the Basic Economic Problem?
Unlimited wants/needs but limited resources (scarcity)
Which factor of production includes machines, tools, and factories?
Capital.
Which sector collects taxes and provides public goods and services?
The Government sector.
What does a point inside the PPC represent?
Underutilisation of resources, such as unemployment or inefficiency.
Which economic system relies mostly on market forces?
A market economy
Why does scarcity exist?
Because resources are limited but human wants are unlimited
Explain how labour differs from enterprise as a factor of production.
Labour is the physical and mental effort of workers, while enterprise involves risk-taking and organising the other factors to produce goods and services.
Explain the role of the financial sector in the circular flow of income.
It channels savings from households into loans for firms and governments to invest and spend.
Explain what opportunity cost is using a PPC.
It is the value of the next best alternative forgone when choosing to produce more of one good over another.
Compare a command economy and a market economy in terms of decision-making
In a command economy, the government makes decisions, while in a market economy, consumers and firms decide through supply and demand.
Explain the relationship between scarcity, choice, and opportunity cost.
Scarcity forces choices, and every choice has an opportunity cost.
Identify which factor of production is most important in a technology-based economy and explain why.
Capital, because technology relies on machines, equipment, and advanced tools to produce goods efficiently.
Describe how injections and leakages affect the level of economic activity.
Injections (investment, government spending, exports) increase economic activity, while leakages (savings, taxes, imports) reduce it.
Describe two reasons why a PPC might shift outward.
An increase in resources (e.g. more labour) or improvements in technology.
Explain why most countries operate as mixed economies.
Because they combine the efficiency of markets with government intervention to correct market failures and provide essential services.
Apply the basic economic problem to a government decision (e.g. health vs defence spending).
Spending more on health means less funding available for defence, showing opportunity cost.
Analyse how a shortage of one factor of production could affect economic growth.
A shortage limits production capacity, leading to lower output, reduced income, and slower economic growth.
Evaluate how an increase in exports would impact at least two sectors in the model.
The overseas sector buys more goods, firms increase production and income, and households receive higher wages and employment.
Analyse how unemployment and technological change would be shown on a PPC.
Unemployment is shown by a point inside the curve, while technological change shifts the curve outward.
Evaluate the advantages and disadvantages of a market-based economic system.
Advantages include efficiency and innovation; disadvantages include inequality and market failure.
Assess how the basic economic problem affects households, firms, and governments differently.
Households choose how to spend income, firms choose what and how to produce, and governments decide how to allocate public resources.