Booklet 1 - Scarcity and Choice Flashcards
Macroeconomics
the study of the inter-relationships at an economy wide level
Microeconomics
the study of economic decisions made by individual economic agents, e.g. households, firms, and the government
Positive statement
a statement about what it is - facts
Normative statement
a statement involving judgement- what ought to be
Ceteris Paribus
All other things remaining the same. Used in economics to focus on changes to one variable while holding others constant
Scarcity
A situation that arises due to unlimited wants and limited resources- the basic economic problem
Needs
things essential to human survival
Wants
Things desired over and above basic needs
Utility
Satisfaction gained from consuming a good or service
Opportunity Cost
The value of the next best alternative forgone when making a decision
Marginal Analysis
An approach to decision making considering the additional benefits and costs of change
Economic agents
Decision makers, such as firms, households, and the government
Free good
A good unlimited in supply such that there is no opportunity cost for consuming it e.g. air
Economic good
A good which is scarce in supply
Factors of production
Resources used in production. CELL Capital Enterprise Labour Land
Land - FoP
Land itself and what it produces
Labour
All human effort used in production- a human resource
Capital
All man made aids to production e.g. machinery, buildings and transport equipment. A physical resource
Enterprise
Initial idea and risk taken. Draws together the other 3 factors of production
Renewable Resource
Natural resources that can be replenished, such as forests
Non renewable resources
Natural resources that once used cannot be replenished e.g. coal and oil
Economic model
a simplified model of reality used to provide insight into economic decisions and events
Production Possibility Frontier (PPF)
A curve showing the maximum combination of goods/services a firm can produce
A Trade-off
Giving up one thing in exchange for another, relates to opportunity cost, sacrificing one good or service to gain more of another
Economic Efficiency
A situation where both allocative and productive efficiency is achieved
Productive Efficiency
when a firm operates at minimum average total cost and produces maximum output (lies on the PPF)
Allocative Efficiency
When consumer satisfaction is maximised
Consumer Goods
Goods which are consumed when we buy them. For present use
Capital Goods/Producer Goods
Goods manufactured for the purpose of producing another good. Increases the future capacity of the economy and are known as investment
Potential Economic Growth
An expansion int the productive capacity of the economy
Gross Domestic Product (GDP)
A measure of the economic activity carried out in a certain period of time
Division of Labour
A process where the production procedure is broken down into a sequence of stages and workers are assigned to stages. Leads to increased output and economic efficiency
Specialisation
The concentration by worker(s), firms, regions or whole economy on a narrow range of goods and services
Market
A set of arrangements that allow transactions to take place
Barter
Exchanging goods and services for other goods and services without using money
