1. Intro To Microeconkmics Flashcards
what is the basic economic problem
people have an infinite amount of wants and needs, but a finite number of resources
define scarcity
a situation that arises as people have unlimited wants in face of limited resources
what are economic goods
goods that are scarce
define free goods
goods that are not usually regarded as being scarce (e.g earths atmosphere)
define poverty
situation in which individuals lack the basic necessities of life or have low incomes relative to their flow citizens
what are firms
an organisation that produces goods and services
compare positive to normative statements
positive statements are based on facts whereas normative involve value judgement on what ought to be
what are the three economic agents
firms
households
governments
what is the main motive of households
to maximise benefits
what is the main motive of firms
maximise profits
what is the main motive of governments
to maximise social well fare
what are the four factors of production and their benefits
land-rent
labour-wage
capital-interest
enterprise-profit
define opportunity costs
value of the next best alternative forgone
what is the production productivity curve
curve showing the maximum combination of two goods or services that can be produced in a set period of time given available resources
what does it mean if the point is within the PPC curve
-indicates inefficient use of resources
what does it mean if the point is on the PPC curve
-indicates allocative efficiency, it is the maximum possible output of goods
Define opportunity cost
The value of the next best alternative forgone
What are the 3 types of efficiency
Allocative
Productive
Pareto
What is Pareto efficiency
When nobody can be made better off without making someone worse off
Making more of one thing that another
What is allocative efficiency
What is benign produced is satisfying consumer wants
What is productive efficiency
Any point on the ppf where resources are being used to their maximum potential
What is a trade off
Situation in which choice of one alternative requires sacrifice of another
3 positives of specialisation
Better allocation of resources
Allows for trade
More productivity
What is a barter system
Economy without money so that goods and services rely on direct exchange
Main government motive
Maximise social wellfare
What are the 3 assumption of the ppc curve
Simplified production into 2 goods only
Resources are mobile between production of the two
FOP are fixed
Define specialisation without econ
Process of concentrating on it to become expert
Define division of labour
Process where production procedure is broken down into a sequence of stages and workers are assigned particular stage s
3 benefits of specialisation
Increased efficiency
Higher output
Lower COP
Innovation
Costs of specialisation
Over reliance on trade
Structural unemployment of industry declines
Loss of skills
Repetitive
What is comparative advantage
When a country is better at producing more effectively that another
What are benefits of trade
Access to a wider market
Variety of foods for consumers
More competition
Costs of trade 3
Over reliance
Trade imbalance
Negatively impact domestic industries
Over reliance
Trade imbalance
Negatively impact domestic industries
