Theme 1.1 Flashcards
What is the Fundamental Economic Problem?
Wants are unlimited while resources are limited.
Who are the economic agents?
- Consumers (the source of demand)
- Producers (firms)
- Governments (regulation)
What are Samuelson’s Three Questions?
- What to produce
- How to produce
- For whom are you producing
What are the Factors of Production (CELL)?
- Land – anything that comes from the earth
- Labour – work done by people in the production process
- Capital – factories, equipment
- Enterprise – decision making and risk taking
What are the types of Natural Resources?
- Free
- Non-renewable
- Renewable (sustainable)
What is a Normative Statement?
A subjective statement with opinions that can support it.
What is a Positive Statement?
An objective statement with facts and evidence that can support it.
How do value judgements influence economics?
They can influence economic decision-making and policy.
What is Opportunity Cost?
The value of the next best choice foregone when making a choice.
What are Economic Models?
Mathematical systems that attempt to mimic complex real-world situations.
What does ‘Ceteris paribus’ mean?
The assumption that other things are being held equal or constant.
Define Utility.
Usefulness.
What is Marginal Analysis?
An approach to economic decision-making based on additional benefits and costs.
What does the Production Possibility Frontier (PPF) represent?
The maximum combinations of goods or services that can be produced with given resources.
What are Consumer Goods?
Goods produced for present use.
What are Capital Goods?
Goods used as part of the production process, such as machinery or factory buildings.
What is Potential Economic Growth?
Expansion in the productive capacity of an economy.
What does GDP stand for?
Gross Domestic Product.
What is Specialisation?
The production of a limited range of goods by a company/individual/country.
What is the Division of Labour?
Specialisation of labour in a particular part of the production process.
List advantages of specialisation and the division of labour.
- Higher output and potentially higher quality
- Greater variety of goods and services
- Opportunities for economies of scale
- More competition and lower costs
List disadvantages of specialisation and the division of labour.
- Work becomes repetitive
- Potential for structural unemployment
- Decreased variety for consumers
- Higher worker turnover
What are Markets?
Where goods and/or services are exchanged.
What are the Four Functions of Money?
- Medium of exchange
- Store of value
- Measure of value
- Method of deferred payment
