1.1 Nature of economics Flashcards
What is the definition of ceteris paribus?
It’s an assumption that allows economists to isolate the effect of one variable while holding others constant.
It’s an assumption that allows economists to isolate the effect of one variable while holding others constant.
What is a positive statement?
Statement that describes the world as it is without making any value judgements
They are based on objective facts, and they can be proven or disproven.
What is a normative statement?
Statements that make a value judgment about what ought to be or what should be
They are based on personal beliefs and values, rather than on objective facts.
What is opportunity cost?
The cost of missing out on the next best alternative.
The benefits that could have been gained by taking a different decision.
What is the Production Possibility Frontier?
The maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed
What are capital goods?
Physical assets or resources that are used in the production of goods and services.
e.g - machinary, equipement, infrastructure, building, facilities, R&D equipment, software, technology and renewable energy infrastructure
What are consumer goods?
What is specialisation?
When there is a concentration on a particular product or task
What is the division of Labour?
Occurs where production is broken down into many seperate tasks
What is the free market economy?
The markets allocate resources through the price mechanism
Adam Smith theorist
What is a planned/ command economy?
When scarece resources are owned by the government
Karl Marx theorist
What is a mixed economy?
Some resources are owned by the public sector (goverment) and some resources are owned by the public sector
