Economics key terms Flashcards
(22 cards)
Allocative efficiency
When economic resources are utilised to produce the combination 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/producer goods
Goods used in the production of other goods.
Consumer good
Goods consumed by households & 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/groups in an economy.
Factors of production
Inputs of the production process, such as land, labour, capital and enterprise.
Finite resource
Non-renewable resource that becomes 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
Prices create incentives for people to adjust their economic transactions.
Need:
Something necessary for human survival, e.g. food, shelter.
Normative statement
Statements including value judgements, that cannot be easily proved/disproved.
Opportunity cost
: Loss of other alternatives due to selecting one of a set of options.
Positive statement
Statements including facts, that can easily be proved/disproved.
Production possibility frontier
A curve displaying the various possible combinations of two products that can be produced with finite resources.
Rationing price function
Prices rise to ration demand for goods
Renewable resource
Restorable resource that can be replenished.
Scarcity
Resulting from the concept of infinite wants and needs, yet limited resources.
Signalling price function
Prices provide information to sellers and buyers, influencing economic decisions.
Trade
Buying and selling of goods and services.
Want
Something desirable, yet not necessary for, human survival.
