1.1 Understanding Economics Flashcards
What is the definition of economics?
Economics is the study of the use of scarce resources that have alternative uses
Why is economics a social science?
Because it relies on society’s behaviour, unlike a normal science which relies on nature
What is the social scientific model?
- Form a theory about behaviour
- Identify all the variables influencing our purchase to verify our theory
- Make hypotheses on how variables are related
- Test the hypotheses
- Make a conclusion
What is the definition of ceteris paribus?
All other things being equal
What is a positive statement?
A statement based on facts, and not opinions. Can be proven using data.
What is a normative statement
A statement based on an opinion (biased). Can not be proven using data.
List the 9 economic key concepts:
WISECHOICES
- Well-being
- Interdependence
- Scarcity
- Efficiency
- Choice
- Intervention
- Change
- Equity
- Sustainability
Whats the basic economic question of scarcity?
The situation where resources (or factors of production) are finite whereas wants are infinite
What are the 4 factors of production?
Land (natural resources)
Labour (workforce)
Capital (machinery, equipment)
Enterprise
What are the rewards of the 4 factors of production?
Land = Rent
Labour = Wages
Capital = Interest
Entrepreneurship = Profit
Whats economic definition of ‘opportunity cost’?
Cost or value of an economic decision in terms of the next best alternative foregone
What are producer goods?
Producer goods are goods used to make consumer goods
What are capital goods?
Finished products to satisfy our needs and want
Whats an economic good?
Have a value and therefore an opportunity cost, they are limited in supply
Whats a free good?
A good in unlimited supply which has no opportunity cost
