1.1 Flashcards
(28 cards)
economics definition
study of human behaviour under scarcity
positive statement definition
a judgement-free statement which can be tested to be true or false
normative statement definition
a statement based on value judgements which cant be tested
factors of production acronym and definition
Capital
Enterprise
Labour
Land
elements needed to produce goods/ services
opportunity cost definition
the foregone value of the next best alternative (what you miss out on)
division of labour definition
assignment of different tasks to different workers to improve productivity
adam smiths invisible hand summary
free and competitive markets result in efficiently allocated resources as both parties and selfish and hence both benefit
productivity definition
output/ input
why specialisation works
repetition develops skills
specific tools become more cost effective
time saved between processes
workers focus on their strengths
derived demand definition
demand for a good or service as a result of the demand of something else
disadvantages of specialisation (6)
cost of training
higher wages
restricts automation
depletes environment
vulnerable to shocks
reliant on workers
advantages of specialisation
more productive, more profit
higher pay for workers as:
- more skilled and knowledge
- more productivity
functions of money (4)
medium of exchange
measure of value
store of value (physically retained)
deferred payment (can borrow)
characteristics of money (6)
durability
portability
divisibility
difficult to forge
limited supply
acceptability
barter definition
trading one good for another, would need a double coincidence of wants
command economy definition
where production, investment, prices and incomes are all determined by the government
free-market economy definition
resources are allocated through supply and demand
mixed economy definition
mix of command and free-market
free-markets pros
allocatively efficient, high competition so more investment and employment
free-market cons
lot of assumptions, more inequality, volatile market which can fail
command economy pros
efficient as planned, more equality and stability
command economy cons
lack of growth incentive, restrictive choice, potentially ineffective as information gap
productive possibility frontier definition
maximum output of two goods/ services at productive efficiency
productive efficiency definition
where all FoP are being fully employed
