Introduction to Microeconomics Flashcards
what are economic goods
goods which have an opportunity cost and suffer from the problem of scarcity
free goods
goods with no opportunity costs and are not scarce meaning they are not traded
basic economic problem
there is unlimited wants but limited products meaning good is scarce and decided where they will be allocated to
scarcity
the shortage of resources in relation to the quantity of human wants
needs
requirement necessary for an individual to live and function e.g food and shelter
wants
something that people desire but don’t necessary need to survive.
normative statements
statements based on value and opinions which cannot be proven or disproven
positive statements
statement’s which can be tested with factual evidence to be proven or disproven
labour
one of the four factors of production; human capital
land
one of the four factors of production; natural resources e.g. coal,oil ect.
capital
one of the four factors of production; manmade goods which can be used in production process
enterprise
one of the four factors of production; willing and able to take risks combining the three other factors of production.
incentives
something which motivates an individual to make a decision and behave a certain way
maximisation
consumers aiming to generate maximum utility, firms aiming ti maximise profit and government aiming to maximise social welfare
resource allocation
how resources are distributed among producers an how goods and services are distributed among consumers
free market economy
an economy where the consumers and firms decided where resources are allocated too
command economy
all factors of production are allocated by the government, so they decide what,how and who produces these goods
mixed economy
combination of both free market economy and command economy
economic efficiency
where resources are allocated optimally, so every consumer benefits and waste are minimised.
productive efficiency
where resources are used to maximise the highest possible output at the lowest possible costs.
allocative efficiency
when resources are allocated to the best interests in society, when the maximum social welfare is equivalent to the maximum utility.
opportunity costs
the value of the next best alternative forgone
trade off
when one thing is lost to gain something
PPC/PPF
shows the maximum productive potential of an economy, using a combination of two goods and resources
