Basic economic theory Flashcards
Define opportunity cost
The Benefit lost from the next best alternative when making choices
What is an economic agent
The general population of the economy that consume goods and services
State 3 types of economic agent
Producer , Consumer , Government
What do producers do
Provide goods and services in the economy, making use of workers and machinery to do so.
What do consumers do
The general population of the economy that consume goods and services
What does the government do
Collect taxes from households and firms and spend taxes in ways to hopefully improve the economy
What is a positive statment
A factual statement that can be proven & tested to see if they are right or wrong
what is a normative statement
Statements that are a value Judgement(state on opinion rather than fact)
A positive statement is ….
objective
A normative statement is….
subjunctive
State the 4 factors of production
Land, Labour,Capital,Enterprise
What is Land
Natural resources such as all raw materials the sea, minerals and farming.
What is Labour
Physical and mental efforts exerted by individuals the production process
What is Capital
All man made goods that can be used to produce other goods or services ie. factories and machines
What is Enterprise
The ability to bring the other three factors of production together to create goods and services and take a risk to set up a company
Define a need
Essential goods and services consumers need to survive
Define a want
Luxury goods or services consumers would like to have but are not a necessity
Define good
A Tangible object that can be purchased and handled by a consumer
Define services
An act or use for which a consumer, firm, or government is willing to pay
Define scarcity
The excess want over what resources available can produce
Define free good
Are not scarce and have zero cost to obtain
Define economic good
Are scarce, so they have an opportunity cost and cost money to obtain
