Economic methodology and the economic problem Flashcards
What is a positive statement?
A statement which can be scientifically proven
What is a normative statement?
A statement which makes a value judgement
What is the purpose of economic activity?
The production of goods and services
Economic welfare is improved when…
Needs and wants are satsified
What is a market economy?
An economy in which the market decides
Name the factors of production
Land, Labour, Capital, Enterprise
What is opportunity cost?
When you give up one thing to give up another e.g the opportunity cost of buying a vinyl record is a CD
What is the difference between an economic and a free good?
Economic goods are subject to scarcity, whilst free goods are not
What does the PPF show?
The balance of producing capital and consumer goods
What is productive efficiency?
When all resources are being used as effectively as possible
What is allocative efficiency?
When resources are being used to maximise satisfaction
