Studied by 1 personopen economy
one that trades with other countries
ceteris paribus
āall other things unchangedā or āall other things being equalā or āall other things remaining the sameā
positive economics
the scientific or objective study of the allocation of resources
positive statement
a statement which can be supported or refuted by evidence
normative economics
the study and presentation of policy prescriptions involving value judgements about the way in which scarce resources are allocated
normative statement
a statement which cannot be supported or refuted because it is a value judgement
choice
economic choices involve the alternative uses of scarce resources
scarcity
economic agents can only obtain a limited amount of resources at any moment in time
scarce resources
resources that are limited in supply so that choices have to be made about their use
economic goods
scarce resources
free goods
resources which are not scarce
wants
desires for the consumption of goods and services
infinite wants
people have a limited number of needs which must be satisfied if they are to survive as human beings, but human wants are unlimited
renewable resources
resources, such as fish stocks or forests, that can be exploited over and over again because they have the potential to renew themselves
non-renewable resources
resources, such as coal or oil, which once exploited cannot be replaced
sustainable resources
renewable resources that are being economically exploited in such a way that it will not diminish or run out
non-sustainable resources
resources which can be economically exploited in such a way that its stock is being reduced over time
capital
the stock of manufactured resources used in the production of goods and services; owners of capital receive interest on their land
enterprise or entrepreneurship
the seeking out of profitable opportunities for production and taking risks in attempting to exploit these; successful entrepreneurs earn a profit from their activities
labour
the workforce; labourers receive wages
land
all natural resources; owners receive rent from land or sums of money from the same land
opportunity cost
the best alternative forgone
PPF or production possibility curve
shows the maximum combination of goods and services that an economy can produce with its current factors of production of a given moment given its resources
economic efficiency
achieved when resources are used for their best use
movement along the demand curve
indicates a change in the combination of goods produced
shift of the demand curve
indicates a change in the productive potential of the economy
capital goods
goods that are used in the production of other goods such as factories, offices, roads, machines, and equipment
consumer goods
goods and services that are used by people to satisfy their needs and wants
specialisation
a system of organisation where economic units, such as households or nations, are not self-sufficient but concentrate in producing certain goods and services and trading the surplus with others
division of labour
specialisation by workers, who perform different tasks at different stages of production to make a good or service, in co-operation with other workers; specialisation by individuals is called the division of labour
money
any item, such as a coin or a bank balance, which fulfils four functions: a medium of exchange, a measure of value, a store of value, and a method of deferred payment
a medium of exchange
e.g. i can sell you my items in return for money, which i can hold on to and then use to buy what i want from someone else
a measure of value
e.g. whatever you want to trade can be valued in monetary terms
a store of value
e.g. people are willing to accept money in return for money
a method of deferred payment
e.g. people are willing to trade and be paid inā¦
production
a measure of the value of the output of goods and services
productivity
output per unit of input employed
market
a market consists of buyers and sellers; in a market, the price of a product changes based on the amount that will be produced and consumed
economic system
a complex network of individuals, organisations, and institutions and their social and legal interrelationships which allocates resources
command, or planned, or centrally planned economy
an economic system where government, through a planning process, allocates resources in society
free market economy, or free enterprise economy, or capitalist economy, or market economy
an economic system that resolves the basic economic problems mainly through the market mechanism
mixed economy
an economy where both the free market mechanism and the government planning process allocate significant proportions of total resources
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