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scarcity
a situation that arises when people have unlimited wants in the face of limited resources
renewable resources
natural resources that can be replenished, such as forests, tha can be replanted, or solar energy that does not get used up
non-renewable resources
natural resources that once used cannot be replenished, such as coal or oil
sustainable development
meets the needs of the present without compromising the ability of future generations to meet their own needs
model
a theoretical concept that looks at how different variables interact
free goods
goods which would not normally be regarded as scarce
ceteris paribus
‘other things being equal’ - when we focus on changes in one variable we hold all other influences constant
opportunity cost
the value of the next-best alternative foregone
economics goods
goods that are scarce - most goods fall into this category
positive statements
economic statements that can be proven to be true or false
positive economics
scientific/objective study of economics
normative economics
concerned with value judgements, study of policy prescriptions for economics
Normative statements
economic statements that cannot be ultimately refuted or supported, opinions about how the economy should work
Factors of production
capital, enterprise, land and labour
Capital
goods and services used to produce other goods and services e.g. physical, human and financial
Enterprise
the mangerial abilityto bring together the other 3 factor inputs into the productive process
land
includes the natural resources available for production
labour
our human input into the production process
PPF definition
shows all the maximum combinations of the output of two goods an economy can produce when all factor inputs are fully and efficiently employed
an outward shift of the PPF
represents an expansion of a firm’s productive capacity
reallocating ____ ________ creates an opportunity cost
scarce resources
What on the PPF represents the rising opportunity cost
the concave shape
economic growth reprsents an ____ in the _____ capacity
increase, productive
economic growth will be higher if you start with more _____ goods as they are used to produce both _____ and ____ goods and services
capital, capital, consumer
capital goods are…
used to produce other goods and services
consumer goods are…
purchased and used directly by individuals for personal consumption
3 causes of a shift out of the PPF
Increase in quantity of factor inputs
Advances in technology = improvements in production processes
Improvement in quality of factor inputs
3 Key advantages of specialisation
Higher labour productivity, surplus output that can be traded internationally, lower prices - higher real incomes
How does division of labour occur
when production is broken down into many separate tasks
3 disadvantages of specialisation
Lower motivation - repetitive work, quality suffers - workers take less pride, rate of absenteeism increases - disatisfied workers