Unit 1 - econ (excluding 20-22p and section 1.5 (31-39))

DOES NOT INCLUDE GRAPHS

scarcity

Economic problem of having limited resources but unlimited human wants and needs to satisfy.

Factors of production

Land: all natural resources to create products including the physical earth

Labour: effort made by humans in the production process

Capital: tangible assets (e.g. machinery, building)

Entrepreneurship: the skill and risk-taking required to combine it into a functioning business

Economic growth

increases of goods and services produced

sustainable development

development that meets the needs of the present without comprimizing the ability of future generations to meet their own needs

Physical capital

used to produce more goods and services in the future

Human capital

skills, abilities and knowledge acquired by people and good health to make them more productive

Natural capital

everything that is included in land, plus additional natural resources

opportunity cost

the value of the next best alternative that must be sacrificed to obtain something else

Free good

a good that isn’t scarce, and therefore has zero opportunity cost.

Economic good

any good that is scarce

Three basic economic questions

-What/how much to produce

-How to produce

-For whom to produce (e.g. should everyone get a equal amount, ect.)

Resource allocation

Assigning available resources, or factors of production, to specific uses chosen among possible alternatives and involves answering the what/how much to produce.

Market economy

a economic system where private individuals and businesses make all the production and pricing decisions

Mixed economy

an economic system that combines private enterprise and free market freedom with government regulation and public services

Planned economy

an economy where all economic decision making is carried out by government planning. Uses non-price rationing to make resource allocation and output decisons. everything is determined by central authority.

Public sector

all parts of the economy that is under government ownership

Free market economy

an ideal type of economy based on the market approach to making economic decisions; involve private ownership and decision making

Uses price rationing (price mechanism: all economic designs are determined by the market)

Positive statements

something that is, was or will be. They’re used to describe, explain or predict economic events by use of hypotheses, theories and models.

Normative economics

based on beliefs or value judgements about what should happen , what is good or bad, and about what is right and wrong. Focuses on the “ought”

Empirical evidence

real-world info.

Value judgements

Opinions

Equity

fairness