Economics Assessment 1

Economics

It is the study of scarcity, how people use resources, respond to incentives, and decision-making

Microeconomics

Is the study of economic behaviour of individuals consumers as well as businesses

Macroeconmics

builds on the foundational knowledge developed in microeconomics and involves the analysis of economy-wide phenomena

Positive Economic Statements

Are fact based economics statements that can be verified or tested to be either true or false using evidence

Normative Economic Statements

Are claims that are based on opinion or value judgements and are subjective in nature and therefore cannot be verified or tested to either true of false

Production

Is the process of making a good or a service

Tangible

Refers to assets that possess physical substance that can be seen, felt or touched

Intangible

Refers to assets or value-drivers that lack physical substance but possess economic value

Income

Refers to earned money. It is given to those involved in the production or goods and services such as wages or salaries

Expenditure

Refers to spending of income on goods and services and spending of income/revenues earned on capital infrastructure and other large items

Relative Scarcity

Refers to the concept that there are unlimited needs and wants and only a limited number of resources to fulfil these needs and wants, which results to make choices

Economic Agents

Operate within a given economy with self interest to either maximise utility, maximise profits and maximise society’s welfare

Needs

The basic goods and services that are necessary for our survival

Wants

Items that we desire to improve our satisfaction or quality of life, but aren’t necessary for survival

Resources

Are those things that are used to produce goods and services; they are also referred to the factors of production

Opportunity Cost

Refers to the value of the next best alternative forgone/sacrificed when a decision is made

PPF

Involves a representation of the production alternatives available to an economy, producing only two goods and services in a form or diagram

Allocatively Efficient

Refers to the best combination of resources that maximises living standards/society’s satisfaction

Technical Efficiency

Refers to the maximum output per given level of input

Underutilisation

Refers to a situation where resources such as labor, capital, or land, are not being used to their full potential.

Market Capitalist Economy

Is an economy that majority of the resources are privately owned and with the allocation of resources determined primarily by the market by forces of demand and supply.