UNIT 1 Flashcards
PPC curves, positive economics, normative economics, demand
factors of production
Land= naturally occurring unprocessed resources/gifts of nature
Labour = human capital, workers paid to do a job
Capital = man made resources used to produce more goods and services/processed natural goods
Entrepreneurship = risk taker that combines other FoPS and keeps profits in return
3 basic economic questions
What, for whom, How.. to produce
consumer goods vs capital goods
consumer goods = goods to households, consumed and disposed of
capital goods = goods for firms to produce other goods/services
microeconomics vs macroeconomics
microeconomics = behaviours of INDIVIDUALS within an economy (consumers + producers)
macroeconomics = study of the TOTAL effect on a nation’s people of ALL the ECONOMIC ACTIVITY
Law of increasing opportunity cost
the more good x produced, the greater the marginal cost (of additional units of goodx) because resources become increasingly scarce
How does a production possibility cost show: opportunity cost, scarcity, economic growth and development.
Opportunity cost = producing more of x, which leads to less y produced.
Scarcity = can only have a certain amount of output
Economic growth = increase in the quantity/quality of FoPs; total output increases = rightward shift
Economic development = Improvement in people’s standard of living over time (increase in actual output)
points of efficiency and inefficiency, and impossibility, on a PPC are when ___
efficient = on the PPC curve (maximisation of current available resources)
inefficient = below curve
impossible = outside of curve (insufficient resources available)
what does unparalleled growth in PPC show (different rates of growth)
Different rates of improvements in the quantity/quality of FoPs
Injections into the circular flow of money, resources, G+S
Government = subsidies
Banks = investment/loans
Foreign markets = exports
Leakages out of the circular flow
Government = tax revenue/G+S
Banks = savings
Foreign markets = imports
Circular flow cycle starting from households to resource market
Households = land, labour capital to the resource market in return for rent, wages, interest
Resource market (Place of production) = land, labour capital to firms in return for costs of production
Firms = provide goods and services to the product market in return for revenue
Product market = finished goods+services to households in return for incomes
Mechanisms of resource allocation
Price = voting through spending (demand = determines where there is more supply, incentive of profit) (market economy)
Command = central authority/government determines levels of output and prices
Traditional = follows long-lived practices/traditions/culture of the past
Mixed economy = Market economy with government intervention. Public + private sector
Positive statements
Facts = supported by evidence = quantifiable observations = descriptive
Normative statements
Opinions = based on observable quantifiable variables, personal
Logic
method of reasoning, describing and explaining in a systematic way
