1.1 nature of economics Flashcards
What is economics
Economics is a social science which requires you to make assumptions
What is the main assumption in economics and what does It mean?
ceteris paribus - means if all other factors stay the same
What is a positive statement
a judgement which is a fact and doesn’t use any opinions
what is a normative statement
it is a normative statement which is opinion based
what is a value judgment
a normative evaluation which bases something on what it should or oughts to be.
what is the economic problem
the problem of scarcity - infinite wants and finite resources
what are the 3 economic agents
Firms
Governments
Households
What do PPFs depict
production possibility frontiers show:
- Max productive potential of an economy
- economic growth
- opportunity cost
- efficiency of allocation of resources
- possible production
what is a capital good
goods that are used in the production of other goods
what are consumer goods
goods used by consumers to satisfy their wants and needs
what causes a PPF shift
An increase in quantity/quality of goods shifts the PPF curve to the right (productive potential increased)
who is Adam smith
‘father of economics’
invisible hand - free markets
division of labour and specialisation ( reference to the pins)
What causes movement along a PPF curve
reallocation of resources
what is division of labour
specialisation of individuals
advantages / disadvantages of division of labour
advantages:
- increased productivity
- increased skills gained
- cost effective
- time saved
disadvantages:
- workers may get bored
- poor quality / less output
