1-1 Nature of economics Flashcards
1
Q
What is ceterus paribus?
A
- All other things being equal.
2
Q
What is a positive statement?
A
- Objective and can be tested with evidence
3
Q
What is a normative statement?
A
- Value judgments, based on opinion rather than fact
4
Q
What is the economic problem?
A
- There is a scarcity of resources, wants are limited and resources are finite
5
Q
What is opportunity cost?
A
- The value of the next best alternative forgone
6
Q
What are the factors of production?
A
- Capital
- Enterprise
- Land
- Labour
7
Q
What are renewable resources?
A
- Resources that can be renewed
8
Q
What are non-renewable resources?
A
- Resources that cannot be renewed
9
Q
What are PPF’s?
A
- Depict the maximum productive potential of an economy, using a combination of two goods or services, when resources are fully and efficiently employed.
10
Q
What can PPF’s be used to show?
A
- Opportunity cost
- Economic growth and decline
11
Q
What are capital goods?
A
- Goods which can be used to produce other goods
12
Q
What are consumer goods?
A
- Goods which cannot be used to produce other goods
13
Q
What is specialisation?
A
- Separating the production task into steps and assigning each worker a specific task
14
Q
What are the advantages of specialisation?
A
- Higher output and quality
- Greater variety of goods and services produced
- Economies of scale
- Lower prices for consumers
15
Q
What are the disadvantages of specialisation?
A
- Lower motivation for workers
- Structural unemployment
- Less variety of goods
- High employee turnover
16
Q
What are the functions of money?
A
- A medium of exchange
- A measure of unit
- A store of value
- A method of deferred payment
17
Q
What are free market economies?
A
- No government intervention
- Market forces of supply and demand allocate scarce resources
- Adam Smith and Frederick Hayek
18
Q
What are the advantages of free market economies?
A
- Increases efficiency
- Regulations removed
- Increased personal freedom
19
Q
What are the disadvantages of free market economies?
A
- Ignores inequality
- Could lead to monopolies
- Overconsumption of demerit goods
- Public goods are not provided
20
Q
What is a command economy?
A
- The government allocated all of the scarce resources in an economy
- Karl Marx
21
Q
What are the advantages of a command economy?
A
- Easier to coordinate resources in times of crisis
- Government can compensate for market failure
- Inequality reduced
- Monopolies prevented
22
Q
What are the disadvantages of a command economy?
A
- Governments fail
- May not meet consumer preferences
- Limits personal freedom
23
Q
What is a mixed economy?
A
- Market is controlled by both the government and market forces of supply and demand
