1.1 The nature of economics Flashcards
What is a model?
A simplified representation of reality used to provide insight into economic decisions and events.
What is ‘ceteris paribus’?
A latin phrase meaning ‘other things being equal’
How is ceteris paribus linked to economics?
It is used in economics when we focus on changes in one variable while holding other influences constant
What is a positive statement?
A statement about what is (i.e. about facts)
What is a normative statement?
A statement that involves a value judgement about what ought to be
What is scarcity?
A situation that arises when people have unlimited wants in the face of limited resources
What is opportunity cost?
In decision making, the value of the next-best alternative forgone
What is marginal analysis
An approach to economic decision making based on considering the additional (marginal) benefits and costs of a change in behaviour
What are factors of production?
Resources used in the production process; inputs into production, particularly including labour, capital, land and entrepreneurship
What are renewable resources?
Natural resources that can be replenished
What are non-renewable resources?
Natural resources that once used cannot be replenished
What is production possibility frontier, (PPF)?
A curve showing the maximum combinations of goods or services that can e produced in a giver period with available resources.
What is potential economic growth?
An expansion in the productive capacity of the economy
What is gross domestic product, (GDP)?
A measure of the economic activity carries out in an economy over a period
What is division of labour?
A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage
What is a market?
A set of arrangements that allows transactions to take place
What is market economy?
An economy in which market forces are allowed to guide the allocation of resources
What is command economy?
An economy in which decisions on resources allocations are guided by the state
What is microeconomics?
The study of economic decisions taken by individual economic agents, including households and firms
What is macroeconomics?
The study of the interrelationships between economic variables at an aggregate (economy-wide) level
AO1
Demonstrate knowledge of terms/concepts and theories/models to show an understanding of the behaviour of economic agents and how they are affected by and respond to economic issues
AO2
Apply knowledge and understanding to various economic contexts to show how economic agents are affected by and respond to economic issues
AO3
Analyse issues within economics, showing an understanding of their impact on economic agents
AO4
Evaluate economic arguments and use qualitative and quantitative evidence to support informed judgements relating to economic issues
What does the factor land consist of?
Includes the land itself, and all the resources found on it or under it, e.g. Fishes in the sea
What does the factor labour consist of?
Refers to the workforce in the economy, any human effect on the production, on which they get paid.
What does the factor capital consist of?
Man-made resources, used to make goods and services. E.g. Machinery
What does the factor entrepreneurship consist of?
An entrepreneur is someone who
