Foundations In Economics Flashcards
(26 cards)
This is the study of the behaviour of individual markets.
Microeconomics
This is the study of how the economy as a whole works.
Macroeconomics
This is an assumption that all other variables are being held equal, when a single variable is being altered in an economic model.
Ceteris paribus
This examines matters of economics that can be proven to be right or wrong by looking at the facts, for example, economic growth in Chile in 2009 was 4.1%.
Positive economics
This examines matters of economics that are based upon opinion and so are incapable of being proven to be right or wrong, for example, economic growth in Australia should have been higher in 2016.
Normative economics
This exists because of the limited availability of economic resources relative to society’s unlimited demand for goods and services.
Scarcity
The resources that are necessary for production. These include: Land, Labour, Capital and Enterprise
Factors of Production
This is the physical factor of production. It consists of natural resources, some of which are renewable (for example, wheat) and some of which are non-renewable (for example, iron ore).
Land
This is the human factor of production. It is the physical and mental contribution of the existing workforce to production.
Labour
This is the factor of production that is made by humans and is used to produce goods and services. It occurs as a result of investment.
Capital
This is the factor of production involving the organization of the other factors of production and also involves risk-taking.
Entrepreneurship
This is the next best alternative foregone when an economic decision is made.
Opportunity cost
These are goods which are unlimited in supply and have no opportunity cost, such as air or sea water. They have an unlimited supply at market price zero.
Free goods
This is a good or service that is relatively scarce and so has a price. An opportunity cost is involved when it is consumed.
An economic good
This is the satisfaction or pleasure that an individual derives from the consumption of a good or service.
Utility
This shows the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently.
A production possibilities curve (PPC)
This is the production of goods and services in an economy achieved in a given time period.
Actual output.
This is the possible production that would be achieved in an economy if all available factors were employed.
Potential output
This occurs when previously unemployed factors of production are brought into use. It is represented by a movement from a point within a PPC to a new point nearer to the PPC.
Actual growth
This occurs when the quantity and/or quality of factors of production within an economy is increased. It is represented by an outward shift of the PPC.
Potential growth
This is the growth of real output in an economy overtime. It is usually measured as growth in real gross domestic product (GDP).
Economic growth
This is a broad concept involving improvement in standards of living, reduction in poverty, improved health and improved education. Increased freedom and economic choice may also be included.
Economic development
This is economic development that meets the needs of the present without compromising the ability of future generations to meet their needs.
Sustainable development
This is an economy where the means of production are privately held by individuals and firms. Demand and supply determine what to produce, how to produce it and for whom to produce.
A free market economy (market economy)
