1.1 Nature of Economics Flashcards
what does cetaris paribus mean
all other variables remain constant
what is a positive statement
one that is a statement of fact - can either be true or false
what is a normative statement
one that is based on opinions or beliefs - they cannot be proven
what is the basic economic problem
resources are scarce - humans have infinite wants and needs but only finite resources
what is a renewable resource
one that can be used repeatedly and naturally replenished
what is a non-renewable resource
one that cannot be naturally replenished
what is opportunity cost
the loss of the next best alternative when making a decision
what does a PPF show
the maximum possible output of two G/S a country can generate if it uses all of its FOPs
what is a capital good
assets that help a firm or country to produce output (manufacturing)
what is a consumer good
end products that have no future productive use
what does an outwards shift of a PPF mean
economic growth - increase in the productive potential of an economy
what causes an outward shift of a PPF
an increase in the quality or quantity of available FOPs
what is the division of labour
when a task is broken up into several component tasks
what are the pros of the division of labour and specialisation
lower cost per unit due to higher productivity
lower costs can mean lower prices
lower costs can mean higher profits and higher wages
increased productivity can allow firms to break into international markets
creation of low skilled jobs
what are the cons of the division of labour and specialisation
task repetition can lead to decrease in worker motivation and boredom
decreased motivation can lead to lower productivity and poorer manufacturing quality
may increase worker turnover rates
mass produced products often lack variety
if a worker loses a job its harder to find a new one since they are only trained in one skill