1.1.1 - 1.1.6 Flashcards
use of ceteris paribus assumption
-ceteris paribus to get around problems of multiple variables
-uses relationship between two factors and assume all other factors remain the same
decisions many be based on
normative statements
moral views
value judgments
positive statement
a statement a that is objective and can be tested
normative statement
a statements where in is subjective and can not be tested- contain value judgement
economists will
develop theories
create economic models to explain phenomena
simplifying assumptions to limit number of variables
test theories
basic economic problem
want are unlimited but resources are finite and scarce
four factors of production
capital
enterprise
land
labour
land-
labour-
enterprise-
natural resources/physical space
human capital
someone who takes risk
goods
services
-physical product you can touch
-in tangible things
economic activity
involves combining the factors of production to create outputs that people consume
economic agents + incentives
producers- people that make goods/services
consumers- people that but the goods/services
governments- sets rules that others in economy have to follow
economic agents and decisions
producers- what to make how much to sell for
consumers- decide what they want to buy and how much to buy for
government- decide how much to intervene in the way prod/cons act
opportunity cost def
the cost of the second best alternative forgone
problems wish using concept of opportunity cost
-not all alternatives are known
-some factors don’t have alternative uses
- lack of info on alternatives
-some factors can be hard to switch to an alternative use
ppf shows
the maximum possible output, the options that are available when you consider the production of just two types of good/services