Micro Book 1 Flashcards
(20 cards)
utility
the benefit someone gains from something
reasons why most people don’t always maximise their utility (4)
- information failure
- unaffordable
- addictiveness
- altruistic acts (e.g. giving money to the homeless)
positive statement
an objective statement that is capable of being tested
normative statement
a statement based on a value judgement or opinion
free-market economy
- resources allocated through markets
- those willing and able to pay the most get the most resources
mixed economy
- markets allocate some resources
- government allocates some resources
- e.g. 21st century UK
planned economy
- government allocates all resources
- income inequality much lower
land
any natural resource occuring on, in or under the ground
labour
the human input into the production process, done by workers, whether mental, physical or mangerial
capital
any man-made aid to production
enterprise
bringing together the other 3 factors of production to decide what to produce and how, in doing so taking a risk
trade-off
where an improvement in one variable leads to a deteriation in another
opportunity cost
the benefit foregone from the next best alternative
productive efficiency
producing at lowest possible average cost
advantages of increasing productivity (5)
- lower average costs
- improved international competitiveness
- higher profits
- higher real wages
- economic growth
technical efficiency
producing maximum possible output from a given level of inputs
allocative efficiency
producing the combination of output that maximises consumer welfare (P=MC)
pareto optimum
situation where nobody can be made better off without someone else being made worse off
dynamic efficiency
becoming more (productively) efficient over time
drawbacks of the division of labour (4)
- boring/repetitive work
- negative extenalities
- increased landfill
- lower competition in markets
- increased scarcity of resources
