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Command Economy
An economy in which production, investment, prices, and incomes are determined centrally by a government.
Division of labour
The breaking down of the production process into small parts with each worker allocated to a specific task.
Economic Good
A product which requires resources to produce it and therefore has an opportunity cost
Free good
A good for which the choice of one use does not require that another be given up.
Free market economy
An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
Imperfect factor substitutability
An increasing opportunity cost where some resources such as labour are better suited to making one item than another. The reason why PPFs are drawn concave to the origin.
Mixed economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
Needs
Requirements in order to be able to sustain a satisfactory quality of life and standard of living such as food, water, energy, transport and communications.
Normative statement
Claims and valued judgements that attempt to prescribe how the world should be
Opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another, what are the benefits/value of the alternative choice compared to the choice you have made?
Positive statement
A factual claim about how the world actually works
Production Possibilities Frontier (PPF)
The productive capacity of the economy; A curve showing the maximum attainable COMBINATIONS of two products that may be produced with available resources and current technology. Shows how the opportunity cost of producing one good increases the more that that good is produced.
Renewable resources
Natural resources that can be replaced within a lifetime.
Resources
All things used in producing goods and services
Scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants-a deficit in resources required to meet the unlimited wants.
Specialisation
Occurs when people and businesses concentrate on what they are best at - production of a limited range of goods
Sustainable Resource
Renewable resource that is being economically exploited in such a way that it will not diminish or run out, use of it now will not compromise the use of it in future generations.
Trade-off
The act of giving up one benefit in order to gain another, greater benefit
Wants
Desires that can be satisfied by consuming a good or service, not essential to lead a satisfactory life but can raise the standard of living.
Four factors of production
Capital: All man made goods and services such as machinery and equipment. Value is given in interest.
Enterprise: Taking risks in the production of goods and services, taken in profits.
Labour: Value of human skill and effort in wages.
Land: All that nature provides (land, water and air), value of land is in rent.
Capital goods
Man-made buildings, machines, technology, and tools needed to produce goods and services.
Consumer goods
products and services that satisfy human wants directly
Consumer Sovereignty
Role of consumer as ruler of the market when determining the types of goods and services produced
Ceteris Paribus
The assumption is that other things are being held equal or constant, so nothing else changes, the effect one economic variable has on another presuming everything stays the same.
Money
anything that serves as a medium of exchange, a unit of account, and a store of value
Demand
the quantity of a good or service that consumers are willing and able to buy at a given price
