Studied by 5 people
The economic problem
Infinite wants but finite resources
How to allocate scare resources (FoP) among competing uses to maximise living standards
Economics as a social science
Study of human behaviour - cannot be analysed in the same way as natural science
Economic vs Natural science testing
value judgements and ideological basis - study of behaviour
no laboratory for economists - no control group to test theories
Economic models
look at how different variables interact - use both qualitative information and statistical data
Purpose of economic activity
The production of goods and services to satisfy needs and wants
Key economic decisions
What to produce
How to produce
Who is it produced for
Factors of Production
Inputs, scarce resources in the production of goods and services
Land
All natural resources available
Labour
All human resources (Skilled and unskilled)
Capital
Any item that assists the production process and has been produced (machinery)
Enterprise
The entrepreneur, risk taker, bringing the other FoP together in order to make profit
Land reward
Rent - allowing corporations to utilise your natural resources
Labour reward
Wages - compensations for the individuals time
Capital reward
Interest - return on investment in machinery
Enterprise reward
Profit - reward for the entrepreneurs ideas/skills
Scarcity
The demand for a good or service is greater than the availability
Scarcity impact
Choices have to be made about how scarce resources are allocated between different uses
Opportunity Cost
the cost of the next best alternative forgone when a choice is made
Positive statements
Factual economic statements for which the accuracy can be verified through a scientific method (not an opinion)
Normative statements (value judgements)
Cannot be found true or false when tested
Note 
Flashcard (121)