Economic methodology Flashcards
(23 cards)
Allocative efficiency
When economic resources are utilised to produce the combo of goods and services that maximise economic welfare
Allocative price function
Prices allocate resources away from markets with excess supply to markets with excess demand
Capital good
Goods used in the production of other goods
Consumer goods
Goods consumed by households and individuals used to satisfy needs and wants
Choice
Selecting one of multiple alternatives when deciding how to allocate scarce resources
Economic welfare
The economic satisfaction/wellbeing of individuals/households in an economy
Factors of production
Inputs of the production process, land labour capital and enterprise
Finite resources
Non renewable resources that are becoming increasingly scarce
Fundamental economic problem
deciding how to best allocate scarce resources to maximise overall economic welfare
Imperfect information
When individuals lack the information to make the best decision
Incentive price function
price creates an incentive for people to adjust their transactions
Rationing price function
Prices rose to ration demand for goods
Signalling price function
Price provides information to sellers and buyers , influencing economic decisions
Need
Something necessary for human survival eg food and shelter
Want
Something desirable but not necessary for survival
Normative statement
statements including value judgements that cannot be easily proved or disproved
Positive statements
Statements including facts that can be easily proved or disproved
Opportunity cost
Value of the next best alternative given up when a choice is made
Production possibility frontier
A curve displaying the various possible combinations of two products that can be produced with finite resources
Renewable resources
restorable resources that can be replenished
Scarcity
Result of infinite wants and needs but limited resources
Trade
buying and selling of goods and services
