Intro to economics

All factors of production

Land, labour and capital (and enterprise)

The economic problem

making choices on how to best allocate resources to best meet needs and wants.

Opportunity cost

the value of the next best alternative forgone.

renewable resources

can be replenished

nonrenewable resources

no mechanism exists to replenish them.

positive statement

a statement that can verifiable by data.

normative statement

a statement that involves a value judgement.

model

a theoretical concept that looks at how different variables interact.

ceteris parabus

all things are equal/ all other factors remain the same

scarcity

when there is unlimited wants while having limited resources to meet those wants

sustainable resource

used in economic activities in such a manner they won't run out

define Production Possibility Frontier

A curve which represents all possible combinations of goods an economy or firm can produce when all factors of production are fully employed and used efficiently

Productive efficiency

When the economy uses minimum inputs to produce maximum outputs at a lower cost.

Allocation efficiency

Social welfare is maximised by the production of goods and services.

Capital goods

goods used to make consumer goods and services.

Consumer goods

goods and services that satisfy our needs.

What are the four functions of money

Medium of exchange, measure of value, store of value, method of deferred payment.

Define Productivity

Measure of efficiency of factors of production measured by output per person employed or output per person hour.

Define Specialization

Occurs when economic units focus on producing specific goods or services.

Define Division of labour

the specialised use of workers within an organisation.

What factors cause irrational behaviour

Influence of other people's behaviour (herding behaviour), habitual behaviour, consumer weakness at computation, asymmetric information.

Define Habitual behavior

Default behaviour and repetition of choices made by consumers. Governments may take advantage, e.g: everyone is an organ donor, you can only opt out instead of opting in.

Define Herd behaviour

Making decision based of what other people do.

Define Priming

Subliminal and sets the consumer up to buy something.

Define Framing

By framing something in a different way, you create a different response.

Productivity equation

total output/total input