1 Economic problem Flashcards
Which types of statements are there?
Positive and Normative
Define economic welfare
the standard of living or general well-being of people in the society
Factors of production
Land, labour, capital, enterprise
What is basic economic problem?
Scarcity compared with society’s unlimited wants
Define opportunity cost
the cost of the next best alternative that you give up when you have to make a choice
How does PPF look like?
y- axis = consumer goods; x-axis = capital goods
Factors that cause PPF to shift outwards
-technological improvements
-discovery of new resources
-improvements in education and training
-increase in working population
Factors that cause PPF to shift inwards
-disasters such as earthquakes
-wars
-global warming
-a prolonged recession
Define economic growth
an increase in the productive capacity of an economy over time
Define productive efficiency
when maximum output is produced from available factors of production and when it is not possible to produce of more good or service without producing less of another
Define allocative efficiency
when an economy’s factors of production are used to produce the combination of goods and services that maximises society’s welfare