1.1.1, 1.1.2, 1.1.3 Nature of economics Flashcards
1.1.1 Economics as a social science, 1.1.2 Positive and normative economic statements, 1.1.3 The economic problem
Define economics
A social science - the study of behaviour and decision making
Define ceteris paribus
All else being the same (other aspects aren’t accounted for)
Define homo-economicus
The assumption that humans are rational, self-maximising individuals
What is a positive statement?
An economic statement about how the world actually is (not opinionated, evidence-based, testable)
What is a normative statement?
A judgement of how the world should be (opinion/value judgement, could be politically motivated/philosophical)
What is the economic problem?
How to allocate scarce (finite/limited) resources to satisfy infinite/unlimited wants
Define scarcity
The lack of sufficient resources to fulfil total wants/needs
What are the four factors of production (the four economic resources)?
- capital
- enterprise
- land
- labour
Define capital
Human-made resources that make other goods (e.g. machinery, blast furnace)
Define enterprise
The skill of organising the other factors of production, while taking risks to make profit
Define land
Any natural resource used to produce goods or services (e.g. farmland, coal)
Define labour
The effort that people contribute to the production of goods and services (occupations/jobs)
Define opportunity cost
The benefit/cost we forgo when we choose an alternative
