1.1 Flashcards
What is the purpose of Economists?
To tackle complex issues concerning what is a very complex real world.
What is an Economic Model?
A simplified representation of reality used to provide insight into economic decisions and events.
What is Ceteris Paribus?
Other things being equal - used when we focus on changes in one variable when holding other items constant.
Why is evaluating an economic model not always good?
It is not guaranteed to be realistic or accurate. It is to be used to predict future behaviour.
Why do Economists use Positive and Normative statements?
They need to be objective in analysis, so the difference must be clear.
What is a Positive Statement?
An objective statement about what is certain (factual evidence).
What is a Normative Statement?
A subjective statement about what is ought to be (opinion on future).
What is a Valued Judgement?
A judgement used in normative statements, based on opinions or beliefs, other than facts.
What is an example of a Positive Statement?
“The air has oxygen in it” - can be verified with evidence.
What is an example of a Normative Statement?
“Workers will be better off if the minimum wage is increased” - effects aren’t definite, it is a valued judgement.
What is the Economic Problem?
When finite resources are scarce and our need exceed them.
What is Scarcity?
A situation that arises when people have unlimited wants with limited resources.
What is Opportunity Cost?
In decision making, the value of the next best thing forgone.
What is Marginal Analysis?
An approach to economic decision making based on considering the marginal benefits and costs of a change in behaviour.
What are the 3 Economic Agents?
- Consumers (People + Households)
- Producers (Firms)
- Government
What is the role of Consumers?
Making spending choices demanding goods and services
What is the role of Producers?
To produce and output goods and services
What is the role of Government?
To fulfil roles in society such as taxation.
What does Factors of Production mean?
Resources used in the production process; inputs into production, particularly including land, labour, capital, enterprise.
What is Labour?
The work done by humans to produce goods.
What is Land?
Where production happens.
What is Capital?
Resources used in the production of goods.
What is Enterprise?
Bringing the other factors together for a profit.
What are Renewable Resources?
Natural resources that can be replenished, such as forests that can be replanted, or solar energy that does not get used up.
What are Non-Renewable Resources?
Natural resources that, once used, cannot be replenished such as coal or oil.
What is “What” in the economic questions?
What goods and services should be produced in a society from its scarce resources.
What is “Whom” in the economic questions?
How should produced goods and services be allocated amongst the population for consumption.
What is “How” in the economic questions?
How should the productive resources of the economy be used to produce these goods and services.
