1.1 Introduction To Micro Flashcards
What is a positive statement?
Factual statements with evidence
What is a normative statement?
Statements that express a valued judgement or an opinion which are subjective
What is oppertunity cost?
The value of the next best alternative foregone
what goods have no opportunity cost?
Free goods e.g) air we breath
What are PPFs?
A PPF shows all the maximum combinations of goods and services that can be made in a certain amount of time with available resources being used efficiently
What is Specialisation?
When people or firms concentrate on producing goods in which they have an advantage in
What is division of labour?
When the production process is broken down into a sequence of stages where workers have a particular stage
What type of economies allocate resources?
1) free market economy
2) mixed economy
3) planned (command) economy
What is a free market economy?
When scarce resources are allocated by price and mechanism
What is a Mixed economy?
When scarce resources are allocated partly by the price mechanism and partly by the government
What is a planned (command) economy?
When scarce resources are allocated entirely by the gov
What are the advantages of a free market?
1) competition & efficiency
2) consumer choice
3) incentives & economic growth
Why is competition and efficiency and advantage for the free market?
Cos the firms in the free market compete for profits and survival do they should strive to increase efficiency
Why is consume choice an advantage for the free market?
Cos to survive and make profits businesses must match their production to what the consumers what to buy. Also more firms that compete increases choice
Why are incentives and economic growth and advantage for the free market?
Free markets have no (or low) income/corporation tax so workers have more incentives to work and business have more incentives to make more profits. This helps towards higher growth
