1. Economic Problem Flashcards
Positive statement
Statement of fact that can be scientifically tested to see if it is correct
normative statement
Statement that includes a value judgement and can’t be refuted by looking at the evidence
Need
Something necessary for human survival
Want
Something desirable not necessary for human survival
Economic welfare
Economic well-being of an individual , group or economy
Economic system
Set of institutions within which a community decides what, how and for whom to produce
Market economy
Economy in which the goods and services are purchased through the price mechanism
Command economy
An economy in which government officials of planners allocate economic resources to firms
Mixed economy
Economy that contains both large market and non market sector in which the planning mechanism operates
Production
Converts inputs into outputs of goods or servcies
Capital good
Good used in production of goods and services
Consumer good
Good consumed by individuals to satisfy needs and wnats
Factors of production
Inputs in production: land , labour, capital and enterprise
Renewable resource
A resource in which with careful management can be renewed as it is used
Non-renewable resource
A resource which is scarce and runs out as it is used
Fundamental economic problem
How best to make decisions about the allocation of scarce resources among competing users to maximise human welfar
Scarcity
Humans have unlimited wants but resource to meet the wants are limited
Choice
Choosing between alternatives when making a decision on how to use scarce resources
Opportunity cost
The cost of giving up the next best alternative
Production possibility frontier
Curve depicting various combinations of two products that can be produced when resources are fully and efficiently employed
Technical progress
New and better ways of making goods for producing more output from scarce resources
Economic growth
Increase in the potential level of real output the economy can produce over a period of time
Full employment
When all who are able and willing to work are employed
Unemployment
When not all of those who are able and willing to work are employed
