1 Economic methodology and the economic problems

Question 1

Market Definition

Answer 1

“place” in which goods are bought and sold

Question 2

normative statement definition

Answer 2

A statement that includes a valued judgement and cannot be proven just by looking at the evidence

Question 3

Positive statement definition

Answer 3

A statement of fact that can be scientifically tested to see if it is correct or incorrect

Question 4

is this statement positive or normative?

The earth is flat

Answer 4

positive can be tested and proven false by evidence

Question 5

words that normative statements often have

Answer 5

ought, should, better, and worse

Question 6

value judgement definition

Answer 6

A statement that reflects someone’s opinion and is not supported by factual evidence.

shows whether something is desirable or not

Question 7

need definition

Answer 7

something that is necessary for human survival, such as food, clothing, warmth or shelter

Question 8

want definition

Answer 8

something that is desirable, such as fashionable clothing, but is not necessary for human survival

Question 9

economic welfare

Answer 9

the economic well-being/standard of living and satisfaction

of an individual, a group within a society, or an economy

Question 10

economic system definition

Answer 10

the set of institutions within which a community decides what, ow and for whom to produce

Question 11

market economy

Answer 11

an economy in which goods and services are purchased through the price mechanism in a system of markets

Question 12

command economy (planned economy) definition

Answer 12

an economy in which government officials or planners allocate economic resources to firms and other productive enterprises.

Question 13

mixed economy

Answer 13

an economy that contains both a large market sector and a large non-market sector in which planning mechanism operates.

Question 14

production definition

Answer 14

converts inputs or factor services into outputs of goods and services

Question 15

capital good (producer good) definition

Answer 15

a good which is used in the production of other goods or services

Question 16

consumer good definition

Answer 16

a good which is consumed by individuals or households to satisfy their needs or wants

Question 17

factors of production definition

Answer 17

inputs into the production process such as land, labour, capital and enterprise

Question 18

renewable resource

Answer 18

a resource, such as timber, that with careful management can be renewed as it is used

Question 19

non-renewable resource (finite resource)

Answer 19

a resource, such as oil, which is scarce and runs out as it is used

Question 20

how do you improve economic welfare

Answer 20

1) increased consumption of material goods
2) whatever increases a persons happiness (family and friends…)

Question 21

fundamental economic problem definition

Answer 21

how best to make decisions about the allocation of scarce resources among competing uses so as to improve and maximise human happiness and welfare

Question 22

scarcity definition

Answer 22

people have unlimited wants but resources to meet these wants are limited.

• people would like to consume more goods and services than the economy can produce with the limited resources.

Question 23

opportunity cost definition

Answer 23

the cost of giving up the next best alternative

Question 24

production possibility frontier (PPF) definition

Answer 24

A curve depicting the various combinations of two products ( or type of products) that can be produced when all the available resources are fully and efficiently employed

Question 25

technical progress

Answer 25

new and better ways of making goods and new techniques for producing more output from scarce resources

Question 26

look up graohs

Answer 26

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Question 27

resource allocation

Answer 27

the process through which the available factors of production are assigned to produce different goods and services

e.g how many of society’s resources are devoted to supplying different products such as food, cars healthcare and defence

Question 28

productive efficiency for an economy

Answer 28

for the economy as a whole occurs when it is impossible to produce more of one good without producing less of another, leads to choice and opportunity cost

Question 29

productive efficiency for a firm

Answer 29

occurs when the average total cost of production is minimised

Question 30

how is inefficiency shown on a ppf

Answer 30

point inside the curve

Question 31

what are feasible points on the ppf

Answer 31

points on or inside the ppf

Question 32

what are infeasible points on the ppf

Answer 32

points outside the ppf (not possible)

Question 33

economic growth definition

Answer 33

the increase in the potential level of real output the economy can produce over a period of time
(increase in GDP over time)

Question 34

full employment definition

Answer 34

when all who are able and willing to work are employed

Question 35

unemployment definition

Answer 35

when not all those who are able and willing to work are employed