Universal Economic Problem (UEP)

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What is the Universal Economic Problem (UEP)?

The problem of how to use scarce resources to satisfy unlimited wants and needs.

What are the three questions that arise from the Universal Economic Problem (UEP)?

  1. What goods and services are to be produced and in what quantities? 2. How are those goods and services to be produced? 3. Who will receive and consume those goods and services?

What is a Free Market Economy?

An economy based on supply and demand with little or no government control.

What is a Command Economy?

An economy where the government decides what goods to produce, as well as the price and quantity of production.

What is a Subsistence Economy?

An economy focused on essentials like food, clothing, and shelter, often found in developing or underdeveloped countries.

What is a Possibility Production Curve (PPC)?

A graphical representation showing different combinations of two goods that can be produced with full employment of resources.

Define productive efficiency.

Productive efficiency is achieved if the economy is producing ON the PPC.

What is the role of enterprise or entrepreneurial ability in the production process?

Enterprise or entrepreneurial ability is the ability to initiate the production process by organizing and combining all necessary factors of production.

Explain the concept of implicit cost.

Implicit cost is any cost that has already occurred but not necessarily shown or reported as a separate expense.

How can economies push their production possibilities curve out?

Economies can push their curve out through innovation, productivity improvements, and immigration.

What is the cost-benefit principle in economics?

The cost-benefit principle states that one should choose to do something only if the extra benefit of doing it is greater than the extra cost.

Define multi-factor productivity (MFP).

Multi-factor Productivity (MFP) is defined as output per unit of combined inputs.

Learn about the Universal Economic Problem (UEP) which involves the challenge of using scarce resources to fulfill unlimited wants and needs. Explore the two ways in which resources are limited and the three key questions it raises. Also, discover the three types of economies, including the free market economy with minimal government intervention.

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