Economic Methodology Flashcards
Allocative efficiency
When resources are used to produce the combination of goods and services that maximise economic welfare
Capital goods
Goods used in the production of other goods
Choice
Selecting one of multiple alternatives when deciding how to allocate resources
Consumer goods
Goods consumed by households and individuals
Economics welfare
The economic satisfaction of households/individuals in an economy
Factors of production
Inputs in the production process, such as, capital, enterprise, land and labour
Finite resources
Non renewable resources that become increasingly scarce
Economic problem
Deciding how to best allocate scarce resources to maximise overall economic wellfare
Imperfect information
When individuals lack the information to make the best decision
Incentive price function
Prices create incentives for people to adjust their economic transactions
Allocative price function
Prices allocate resources away from markets with excess supply to markets with excess demand
Needs
Something necessary for human survival
Normative statement
Statement including value judgements, that cannot be easily proved/disproved
Positive statement
Statement ps including facts, that can easily be proven/disproved
Opportunity cost
Loss of other alternative due to selecting one of a set of options
