1 - Economic Methodology Definitions Flashcards
Want
Things that people may desire, but aren’t essential for survival.
Need
Things that are essential for human survival
Economic Welfare
The level of prosperity and living standards in an economy.
Positive statement
Fact based statements which can be measured against statistics.
Normative statement
Statements which can’t be measured against fact, usually an opinion.
Factors of production
Inputs used to produce a good or service. Land, Labour, capital, enterprise.
Fundamental economic problem
The idea that resources aren’t unlimited, but wants and needs are, but not all of them can be fulfilled.
Scarcity
The idea that resources are limited, and everybody has to make choices.
Opportunity cost
The benefit which is missed out when choosing another option.
Rational behaviour
Decisions that are made based on what would maximise utility for an individual.
Production Possibility Curve
Shows the maximum amount of output when all possible resources are used.
Productive Efficiency
The concept of producing the largest possible output, using all resources available in an economy.
Allocative Effificency
The production of all goods and services, if they meet the needs and wants of society, and are allocated accordingly.
Utility
The total satisfaction derived from consuming a good or service.
Utility Maximisation
The idea that individuals and companies seek to achieve the highest level of satisfaction when making decisions.
