1.1. Nature of Economics Flashcards
What Is Ceteris paribus
Economists use the term ‘ ceteris paribus’
meaning ‘all other things remaining equal’.
For example, when there is a change in
income, demand will shift, ceteris paribus.
What Is A Positive Statement
a statement which is objective and made without any
obvious value judgements or emotions.
They can be tested to be proven or disproven
and they are often expressed in the form of a hypothesis that can be analysed andevaluated.
What Is A Normative Statement
subjective and based on opinion, so cannot
be proven or disproven.
What Is The 4 Factors Of Production
Land- All natural resources used in production such as Raw Materials, Minerals, Land.
Labour- All productive human effort, both physical and mental, paid or unpaid work. The value of a worker is their human capital.
Capital- All man made resources that are used to produce goods or services in the future. Owners of capital recevie intrest on their land.
Entrepreneurship- Willingness and ability to take the risks of combining the other 3 factors of production in order to make a product or a service. Successfull entrepreneurs earn profit on their activities.
Mixed economy
This is an economy where both the free market mechanism and the government planning process allocate a significant amount of the total resources in the country.
The government’s role in a mixed economy.
Creating a framework of rules: They prevent the abuse of monopolies
Supplements and modifies the price system: They produce public and merit goods, such as emergency services and transport
Redistributes income: They move income from one group of people to another, from the rich to the poor.
Stabilises the economy: The government will attempt to manage the level of demand in the economy to prevent extremes of too much or too little demand.
What is a Opportunity Cost?
cost of one thing in terms of the next best option
which has been given up
The cost of the next best forgone when a choice is made.
What is a Free Market?
Any Place where buyers meet suppliers to exchange goods and services, free from goverment intervention.
What is a Command Economy?
In a command (planned) economy, all factors of production, except labour, is owned by
the state and labour is directed by the state.
What is PPF
The PFF ( Production possibility frontiers ) shows the maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and
technology.
It tends to be drawn as a curve.
