Unit 1 Flashcards
1.1 Economic Methodology 1.2 The Nature and Purpose of Economic Activity 1.3 Economic Resources 1.4 Scarcity, choice and allocation of resources 1.5 PPC (51 cards)
What does ‘ceteris paribus’ mean?
All other factors remain the same, only one thing changes.
What’s the difference between normative and positive statements?
Positives are quantifiable and factual, they can be tested against facts.
Normatives are subjective and opinions, not true or false.
What is opportunity cost?
The next best alternative forgone.
What are wants?
Not essential, but a desired product or service.
What is a need?
Something essential, it is required by someone.
What is the central issue of Economics?
We as humans have unlimited wants/needs but are in a world where resources are limited.
What are the 3 key economic decisions?
What to produce
Who to produce it for
How to produce it
Why do we want to improve our economic welfare?
Increases real GDP per capita, improving standards of living and they can therefore afford to pay for more or their wants/needs.
What is a free market economy?
One where firms decide what goods and services to produce limited intervention from the government.
What are the 4 factors of production?
Land
Labour
Capital
Enterprise
What is labour? (FoP)
All the workforce in an economy
What is Land? (FoP)
All of the natural resources that come from the earth that are used in the production of goods/services.
What is Capital? (FoP)
The man-made aids that are used in production e.g machinery.
What is Entrepreneur? (FoP)
How everything is organised
What is meant by ‘trade offs’?
All the alternatives given up in opportunity cost.
What is an economic good?
A good which has an opportunity cost in consumption as it uses up natural resources.
What is a free good?
One which has no opportunity cost as it doesn’t use up resources.
What do Production Possibility Diagrams illustrate?
Different features of the fundamental economic problem, like resource allocation, opportunity cost.
How do you improve your economic welfare?
Improving wants and needs
What is scarcity?
Unlimited wants from consumers, yet finite resources
Difference between capital good and consumption good?
Capital: will bring a stream of income in the future
Consumption: consumed that day
What is key about individual demand?
Utility
What is utility?
The satisfaction or benefit that a consumer gains for consuming a good/service
Assumptions of individual demand?
- Place a value equal to perceived satisfaction
- Aim to maximise utility per £
- Rational consumers will only consume if perceived satisfaction is equal to or more than the price
