Theme 1 Flashcards
(21 cards)
What is a free market economy
Individuals make the decisions about the business.
For example what to produce, how to produce and for whom
What is a command economy
The government makes all the decisions
What are the three economies
Free market
Mixed
Command
What is microeconomics
This is the study of economics at the level of the individual business, people/household
What is macroeconomics
The branch of economics that focus on the structure, performance, behaviour and decision making of the whole economy
What are positive statements
They are statements that can be tested with evidence to be right or wrong
What are normative statements
These are subjective statements that carry judgment on peoples opinion
What are rational consumers
They wish to maximise their satisfaction or utility from consumption by correctly choosing how to spend their limited income
What is a rational consumer
They wish to maximise their satisfaction or utility from consumption by correctly choosing how to spend their limited income
What are the factors of production
Land, labour, capital, enterprise
What factors cause an outwards shift in the PPF
Higher productivity/ efficiency
Better management of factor inputs
Increase stock of capital and labour supply
Innovation/invention of a new product e.g change in technology
Discovery/extraction of new natural resources (land)
What causes an inward shift in PPF
Damaging effect of natural disasters such as drought, a tsunami, an earthquake, floods ect
Destruction/ loss of factor inputs caused by civil wars
Large scale labour migration e.g due to an economic depression that leads to a brain drain of skilled workers
Decline in productivity
Opportunity cost
Cost of missing out of the next best alternative
What is capital
One of the factor of production, that providing revenue or services to the owner. Capital can include tangible assets
What is consumer durables
Products that provide a steady flow of satisfaction/utility over their working life e.g a washing machine or a smart phone
Consumer non-durables
Products that are used up in the act of consumption e.g drinking a coffee
Short run
At least one factor of production is fixed
Long run
All factors of production are variable
What are the factors of production
Land, labour, capital, enterprise
Production
Production is the measure of value of the output of goods and services
Productivity
This means the efficiency of the production process
