A-Level Economics: Micro

Vocabulary flashcards covering basic economic concepts including ceteris paribus, scarcity, opportunity cost, PPFs, positive vs normative statements, factors of production, specialisation, division of labour, and the functions of money.

Ceteris Paribus

A Latin phrase meaning "all other things remaining equal," used by economists when analyzing the relationship between two factors by assuming only those two factors change.

Need

Something that is essential for human survival, such as food, water, and shelter.

Want

Something that is not essential for survival but can increase happiness, such as holidays, videogames, and video subscriptions.

Opportunity Cost

What is given up in order to do something else; specifically, the next best alternative that is forgone.

Positive Statement

Objective statements that can be tested, accepted, or rejected by referring to empirical evidence.

Normative Statement

Subjective statements that contain value judgements and opinions, which cannot be tested or proven strictly with evidence.

Value Judgements

Opinions about what is considered right, desirable, or fair that influence economic decision-making regarding how scarce resources should be allocated.

Production Possibility Frontier (PPF)

A curve showing the maximum possible output combinations of two goods or services that an economy can produce when all resources are fully and efficiently employed.

Efficient Points on a PPF

Output combinations that lie directly on the Production Possibility Frontier curve, representing full utilization of available resources.

Inefficient Points on a PPF

Output combinations located inside the Production Possibility Frontier curve, indicating underutilized or wasted resources.

Unattainable Points on a PPF

Output combinations located outside the Production Possibility Frontier curve that cannot be produced given current resources and technology.

Outward Shift of the PPF

An increase in the total productive capacity of an economy caused by increased resources (such as an increased number of workers), improved technology, or improvements to labour.

Capital Goods

Man-made assets used in the production process to produce other goods and services (e.g., machinery, delivery vehicles, and warehouses).

Consumer Goods

Goods that are the final end result of production and are purchased directly by consumers to satisfy wants and needs.

Worker Specialisation

When individual workers focus on performing a single specific task, resulting in high skill levels, speed, and overall efficiency.

Firm Specialisation

When a business focuses on producing one specific type of product or market niche to improve quality and maintain low prices.

Regional Specialisation

When a geographic area focuses on a specific industry where it holds a natural advantage, leading to a concentrated skilled labour force and boosted trade.

Division of Labour

The breakdown of a production process into distinct individual tasks, allowing workers to specialize, reduce training costs, and improve output quality and speed.

Medium of Exchange

A primary function of money where both buyers and sellers recognize its value, enabling trade without requiring a double coincidence of wants inherent in bartering.

Measure of Value

A function of money that provides a common unit of account to assign price and value to different goods and services.

Store of Value

A function of money that allows purchasing power to be preserved and retrieved in the future, remaining relatively stable in value.

Standard of Deferred Payments

A function of money that allows goods or services to be acquired immediately while paying at an agreed-upon future date (e.g., car payments, university fees).

Capital (Factor of Production)

Equipment and man-made physical assets used in the production process, such as machines, delivery vehicles, and warehouses.

Enterprise (Factor of Production)

The risk-taking role performed by individuals who organize the other factors of production to create businesses.

Land (Factor of Production)

All natural physical resources used in production, including physical territory, water, minerals extracted by mining, and both renewable and non-renewable resources.

Labour (Factor of Production)

Human work and exertion contributed to production, such as teaching, preparing food, or building structures.

Renewable Resources

Natural resources that can be naturally regrown or regenerated at a rate faster than they are consumed, such as solar power, wood, and water.

Non-Renewable Resources

Natural resources that exist in finite quantities and will eventually run out through consumption, such as oil, coal, and metal ores.