booklet one economics

booklet one economics basics improved.

Economics

The study of how society allocates scarce resources to satisfy unlimited wants.

Economic problem

The problem that resources are scarce but human wants are unlimited.

Economic welfare

The level of satisfaction or economic well-being experienced by individuals or society.

Microeconomics

The study of individual markets, consumers and firms.

Macroeconomics

The study of the economy as a whole.

Factors of production

The resources used to produce goods and services: land, labour, capital and enterprise.

Land

Natural resources used in production, such as raw materials and minerals.

Labour

Human effort, both physical and mental, used in production.

Capital

Man-made resources used to produce goods and services, such as machinery and buildings.

Entrepreneur

A person who organises the factors of production and takes risks to make a profit.

Factor endowment

The quantity of resources available to an economy.

Factor market

A market where factors of production are bought and sold.

Renewable resources

Resources that can be replenished over time, such as solar energy and forests.

Profit

The amount left when total revenue is greater than total costs.

Production

The use of resources to create goods and services.

Want

A good or service that people desire.

Scarcity

The situation where limited resources cannot satisfy unlimited wants.

Choice

The need to choose between different uses of scarce resources.

Opportunity cost

The value of the next best alternative forgone.

Economic good

A good that is scarce and therefore has an opportunity cost.

Free good

A good that is not scarce and therefore has no opportunity cost.

Specialisation

When a worker, firm or country concentrates on producing a particular good or service.

Exchange

The process of trading goods and services between people or organisations.

Division of labour

When production is split into separate tasks performed by different workers.

Productivity

The amount of output produced per unit of input.

Production possibility curve (PPC)

A diagram showing the maximum possible combinations of two goods an economy can produce using its resources and technology.

Productive potential

The maximum amount an economy is capable of producing.

Productive efficiency

When a firm produces at the lowest possible average cost.

Allocative efficiency

When resources are allocated to produce the goods and services most wanted by society.

Human capital

The skills, knowledge and experience possessed by workers.

Free market economy

An economy with limited government intervention where prices and resource allocation are mainly determined by markets.

Command economy

An economy where the government controls the allocation of resources.

Mixed economy

An economy containing both a public sector and a private sector.

Value judgement

An opinion that cannot be proven true or false and depends on personal views.

Normative statement

A statement based on opinions or value judgements about what ought to happen.

Positive statement

A statement that can be tested against real-world evidence.