Economic Methodology And The Economic Problem Flashcards
Normative statements
Opinion. Based on judgements and views. ‘The government should lower tax’
Purpose of economic activity
The production of goods and services to satisfy needs and wants.
What is a need?
A necessity. E.g. Food, water, clothes.
What is a want?
A non essential product. E.g. A book
Economic welfare
The economic well-being of an individual, a group within society, or an economy.
Factors of production
Land, labour, capital and enterprise.
Production
A process, or set of processes, that converts inputs into output of goods.
Capital good
A good with is used in the production of other goods or services. Also knows as a producer good
Consumer good
A good which is consumed by individuals or households to satisfy their needs or wants.
Entrepreneurs
They decide what to produce and for whom to produce it for. A financial risk taker and decision maker in pursuit of profit.
Finite resource
A resource such as oil, which is scarce and runs out as its used.
Renewable resource
A resource, such as timber, that with careful management can be renews as its used.
Fundamental economic problem
How best to make decisions about the allocation of resources among competing uses so as to improve and maximise human happiness and welfare.
Scarcity
Results from the fact that people have unlimited wants but resources to meet these wants are limited.
Opportunity cost
The cost of giving up the next best alternative.
