1.1 Nature of economics key definitions

what is the definition of ceteris paribus?

• all other variables remain constant.

what is the definition of a positive statement?

• positive economic statements are objective statements that tend to be based on facts.

what is a normative economic statement?

• normative economic statements are subjective statements based around the idea of value judgements.

what is the definition of a renewable resource?

• renewable resources can be used repeatedly and naturally replenished.

  • for example, wind generated electricity.

what is the definition of the basic economic problem?

• the basic economic problem is that resources are scarce.

  • there are finite resources available in relation to the infinite wants and needs that humans have.

what is the definition of non-renewable resources?

• non-renewable resources cannot be naturally replenished at a pace that keeps up with consumption.

what is the definition of opportunity cost?

• opportunity cost is the loss of the next-best alternative forgone when a choice is made.

what is a PPF?

• PPF is an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production efficiently to produce only 2 goods/services.

what is the definition of division of labour?

• division of labour is when a task is broken up into several component tasks.

what is the definition of specialisation?

• specialisation is the concentration on one good/service by firms.

what is the definition of a free-market economy?

• a free market economy is an economy that has no government intervention in the allocation of resources or distribution of goods/services.

what is the definition of a command economy?

• a command economy is an economy in which all of the resources are owned by the state and the government controls the distribution of goods/services.

what is the definition of capital goods?

• capital goods are assets that help a firm or nation to produce output.

what is the definition of consumer goods?

• consumer goods are end products and have no future productive use.