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verbatim
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scarcity
the situation where limited resources are unable to fufil unlimited human wants and needs
factors of production
CELL (Capital, Entrepreneurship, Land, Labour)
opportunity cost
The value of the next best alternative forgone when a decision is made
free good
A good which are not scarce and thus requires no opportunity cost to produce ( ie sunlight)
economic good
are scare, requires resources to produce, have opportunity cost
Three basic economic questions
what to produce (and how much)?
whom to produce for?
how to produce?
free market economy
Economy where means of production are privately owned and market forces determining the answers to the three basic economic questions
planned economy
Economy where everything is “planned” by the government, government determines the answer to the three basic economic questions
mixed economy
An economy that has elements of a planned economy and elements of a free market economy. In reality, all economies are mixed. What is different is the degree of the mix from
country to country.
PPC model (assumptions + graph)
Assumes:
technology is constant
all resources are fully employed and used efficiently
Capital Good/ Consumer good
all possible combinations of the maximum number of two goods/services that can be produced within an economy, given that technology and resources are fixed, when all resources are fully employed and efficiently used
PPC in relation to scarcity, choice and opportunity cost
Scarcity: cannot produced outside the PPC
Choice: economy can only choose one combination of goods to produce at
Opportunity cost: increasing production of one good with result in the decrease in production of another good
actual growth vs growth in production possibilities (PPC) (and causes)
actual growth: movement of a point in PPC closer to the PPC curve, caused by reduced unemployment and more efficient use of resources
Growth in production possibilities: outward shift of PPC curve outwards. caused by improved quantity and quality of FOP, improved technology
circular flow of income model (+leakages and injections)
Leakages: savings, taxes, imports
Injections: investment, exports, government spending

positive vs normative statements
positive: based on fact, uses stats and hypothesis
Normative: based on opinion, personal beliefs