1.1.1 The Economic Problem Flashcards
Positive Statements
Positive statements are objective (based on facts) statements that can be tested, amended or rejected by referring to the available evidence. For e.g. A fall in incomes will lead to a rise in demand for own-label supermarket foods.
Normative Statements
A value judgement is a subjective (opinion) statement of opinion rather than a fact that can be tested by looking at the available evidence. For e.g. Pollution is the most serious economic problem.
Scarce Resources
A resource with an available quantity less than its desired use. Scarce resources are the workers, equipment, raw materials, and organisers used to produce scarce goods.
Opportunity Cost
The loss of other alternatives when one alternative is chosen. For e.g. you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can’t spend the money on something else.
Trade-off
The balance between two desirable outcomes, where both are not achievable. A trade-off arises where having more of one thing potentially results in having less of another.
Factors of production
- Land (natural resources available for production eg. Rental income to owners of land)
- Labour (eg. Wages and salaries, it’s the human input into the production process)
- Enterprise (entrepreneurs organise factors of production and take risks eg. Profits)
- Capital (Goods used in the supply of other products e.g interest from savings + dividends for shares)
Capital Goods
Goods used to make consumer goods and services. Capital Inputs include fixed plant and machinery, hardware, software etc.
Consumer goods and services
Goods which satisfy our needs and wants directly.
Consumer durables
Products that provide a steady flow of satisfaction / utility over their working life (eg. A washing machine or using a smartphone)
Consumer non-durables
Products that are used up in the act of consumption eg. Drinking a coffee or turning on the heating
Consumer services
Eg. Hair cuts or a ticket to a show/gig
