4.1.1 Flashcards
Normative Statements
Statement based on a value judgement
Positive Statement
A statement based on facts and can be proven to be right or wrong
Define Need
A core component for human survival
Define want
Something which people feel improves their standard of living
Economic welfare
The standard of living or general wellbeing of people in survival
Economic activity
Is about the production of goods and services to satisfy needs and wants
Key economic decisions
What to produce
How to produce it
Who is to benefit from goods and services
Command economy
100% public ownership with communist idelology
Free market economy
100% private ownership and pure free market economy
Production
The process of combining scarce resources into a finished product- a good or service
Factors of production
Land
Labour
Capital
Enterprise
Basic economic problem
Economic resources are scare compared with the unlimited wants of society
Opportunity cost
Opportunity cost is defined as the cost of foregoing the next best alternative
Economic good
Has an opportunity cost when consumed like a bottle of water
Free good
Has zero opportunity cost of consuming like air
The environment as a scare resource
- limited quantity of the environment
- unlined envirometal wants
- Not a free good
- Has an opportunity cost to use
- climate change is the opportunity cost
Factors causing an outward shift of the PPC
Technological improvements that lead to increased productivity of capital equipment
Discovery of new resources
Improvements in education and resources
Changes that lead to an increase in increase in working population
Factos causing and inward shift in the PPC
Disasters
changes decreasing factor of production and decreasing working population
Prolonged recession leading to loss in productive capacity
Climate change impacting land as a factor of production
Productive efficiency
When maximum output is produced from the availability of the factors of production and it is not possible to produce any more of a good without producing less of another
Allocative efficiency
When an economics factors of production are used to produce the combination of goods and services that maximises society’s welfare
