1: Economic methodology and the economic problem Flashcards
What is a normative statement?
A statement that cannot be scientifically tested.
A statement that cannot be scientifically tested.
Normative statement
Positive statement definition
A statement of fact that can be proven or disproven with evidence.
A statement of fact that can be proven or disproven with evidence.
Positive statement
What kind of words are often a clue that a statement is a normative one?
ought
should
better
worse
What is a value judgement?
When a judgement is made regarding how resources should be assigned based on a desirable outcome rather than pure objective reasoning.
When a judgement is made regarding how resources should be assigned based on a desirable outcome rather than pure objective reasoning.
Value judgement definition
What is meant by the term ‘economic welfare’?
the economic well being of an individual, group or society.
the economic well being of an individual, group or society.
What is this sentence referring to?
Economic welfare
What is a ‘need’
Something that is necessary for human survival such as food, water and warmth.
Something that is necessary for human survival such as food, water and warmth.
What is this sentence referring to?
‘Needs’
What is a ‘want’?
Something that is desired but not necessary for human survival.
Something that is desired but not necessary for human survival.
What is this sentence referring to?
‘Wants’
What is an economic system?
The set of institutions within a community that make up the decision making of what, how and for whom to produce.
The set of institutions within a community that make up the decision making of what, how and for whom things will be produced.
What is this a definition of?
An ‘economic system’
What are three ways an economic system can be defined based on the decision making on how its scarce resources are distributed?
1) Market economy
2) Command economy (planned economy)
3) Mixed economy
What is a ‘market economy’?
An economy where goods and serviced are exchanged through ‘price mechanism’ in a system of markets.
An economy where goods and serviced are exchanged through ‘price mechanism’ in a system of markets.
What is this statement referring to?
Market economies
What is a ‘command economy’?
An economy where the government allocates economic resources.
An economy where the government allocates economic resources.
What is this statement referring to?
A planned economy
What is a ‘mixed economy’?
An economy where there is a large market sector and a large non-market sector in which the planning mechanism operates.
An economy where there is a large market sector and a large non-market sector in which the planning mechanism operates.
What is this statement referring to?
A mixed economy
What is ‘production’?
Production converts inputs or factor services into outputs of goods or services.
Converts inputs or factor services into outputs of goods or services.
What is this statement referring to?
The definition of ‘production’
What is meant by a ‘capital good’?
Goods which are used in the production of goods and services.
Goods which are used in the production of goods and services.
To what is this statement referring to?
Capital goods/ producer goods
What is a ‘consumer good’?
Goods that are consumed by individuals or households to satisfy their needs or wants.
Goods that are consumed by individuals or households to satisfy their needs or wants.
To what is this statement referring to?
‘Consumer goods’
What is the definition of ‘factors of production’?
Inputs into the production process.
Inputs into the production process.
What is this definition referring to?
Factors of production.
What are the main ‘factors of production’?
1) Land
2) Labour
3) Capital
4) Enterprise
5) Entrepreneurship
What is the ‘fundamental economic problem’?
How best to make decisions about the allocation of scarce resources to maximise human happiness and welfare.
How best to make decisions about the allocation of scarce resources to maximise human happiness and welfare.
What is this statement a definition of?
The ‘fundamental economic problem’
What is ‘scarcity’?
Results when people’s wants are greater than the amount of resources available.
Results when people’s wants are greater than the amount of resources available.
What is this statement referring to?
‘Scarcity’
What is ‘choice’ in the context of economics?
Choosing between alternatives when making decisions on how to make use of a scarce resource.
Choosing between alternatives when making decisions on how to make use of a scarce resource.
What is this a definition of?
‘Choice’ in an economic context.
What is an ‘opportunity cost’?
The cost of giving up one thing over another.
The cost of giving up one thing over another.
What is this a definition of?
An ‘opportunity cost’.
What is a ‘Production Possibility Frontier’?
- A curve depicting the various combinations
- of two products (or types) that can be produced when
- all the available resources are fully and efficiently employed
- A curve depicting the various combinations
- of two products (or types) that can be produced when
- all the available resources are fully and efficiently employed
What is this a definition of?
‘Production Possibility Frontier’
What is ‘technical progress’?
New and better ways of making goods and for producing more output from scarce resources.
New and better ways of making goods and for producing more output from scarce resources.
What is this a definition of?
‘Technical progress’
What does PPF stand for?
Production Possibility Frontier
What is meant by ‘Productive Efficiency’ when referring to the economy as a whole?
When all resources are being utilised as efficiently as possible to the point that to produce more of one output, the economy has to produce less of another.
When all resources are being utilised as efficiently as possible to the point that to produce more of one output, the economy has to produce less of another.
What is this statement referring to?
‘Productive Efficiency’ in the context of the economy as a whole.
What is ‘Productive Efficiency’ when referring to a firm?
When the average total cost of production is minimised.
When the average total cost of production is minimised.
What is this statement referring to?
‘Productive Efficiency’ in the context of a firm.
What is ‘fixed capital’?
Building, plants and machinery
Building, plants and machinery
What is another name for such assets or capital?
Fixed capital
What is ‘working capital’?
Stocks of components and raw materials.
Stocks of components and raw materials.
What is another name for this type of asset or capital?
Working capital
