Micro AS Flashcards
(100 cards)
value judgements
statements or opinions expressed that cannot be tested against real world data and depend a lot on the individuals views
normative statement
statement/opinion that requires a value judgment to be made
positive statement
can be tested against real world data
basic economic problem
needs and wants are endless but resources are finite- economics looks at how best to employ the resources to maximize economic welfare
4 factors of prodiction
land, labor , capital, entrepreneurship
rewards for the factors of procuction
land-rent, labor-wages, capital-interest, entrepreneurship-profit
3 functions of price
rationing(consumers) incentive(producers) signaling(entrepreneurs)
ppf/ppb
production possibility frontier/boundary- shows maximum output achievable given a fixed set of resources and tech in a given time frame
factors that shift ppf to the right
investment in new tech, increased supply of labor, more resources, improvements in human capital (training/education), increased productivity, encouraging entrepreneurship
human capital
the skills abilities, motivation and knowledge of labour
productivity
a measure of efficiency measuring the ratio of inputs to outputs
factors that shift ppf to the left
war, emigration, disease, disaster,decline in investment in capital
productive efficiency
when a firm operates at maximum average total cost producing the maximum possible output possible from its inputs, For the economy as a whole occurs when it is impossible to produce more of one good without producing less of another or you cant make one person bettor off without another becoming worse off
allocative efficiency
occurs when available resources are used to produce the combination of goods that best matches peoples tastes and preferences
demand
the amount that consumers are willing and able to buy at each given price level
supply
the amount that producers are willing and able to supply at each given price level
contraction in demand
when demand shrinks along the demand curve
extension in demand
when demand rises (along the demand curve)
determinants of demand
changes in population, seasonality, low interest rates, income changes, prices of substitutes, advertising, consumer confidence, changes in quality, law, fashion, consumer tastes and preferences, uncertainty over future prices
inferior good
goods or services that will see demand fall as incomes rise
normal good
good or service for which demand rises when incomes rise
substitute
A good that can be used as a replacement for another good
complementary product
a good that is consumed together with another good
composite demand
a good that is demanded for more than one purpose so that when demand for one purpose increases supply for the other decreases