Chapter 1 Flashcards
What are economic goods
Goods that are scarce, there are a limited amount of them
What are free goods
goods that are not normally regarded as being scarce, such as the atmosphere
Positive statements
A statement about what is, such as facts
Normative statements
A value judgement, about what ought to be. Opinion based
What is the basic economic problem
There is unlimited wants but limited resources
What are the factors of production
CELL - Capital, Enterprise, Land and Labour
What is opportunity cost
When making a decision, the value of the next best alternative to your choice. If you choose coke then the opportunity cost might be Pepsi. The value of the next best alternative forgone
What is a trade-off?
A trade-off, the choice of one alternative requires a sacrifice of another
What shifts the demand curve?
Advertising, population size, trends, change in income, prices of other goods (complementary and competitive) and legislation
Examples of Labour in the factors of production
Labour is a human resource, these humans have different skill sets/levels
Examples of Capital in the factors of production
These are non-human resources, such as: Machinery, Transport, equipment and factory buildings
Examples of Enterprise in the factors of production
This is another human resource, an entrepreneur. Someone who organises production and identifies projects to be undertaken and bearing the risk of the activity. This
Examples of Land in the factors of production
Fields, forests etc, raw resources provided by mother nature
What does PPC stand for
Production possibility curve
What is a PPC
A curve showing the maximum combinations of goods or services that can be produced in a set period of time, given the available resources. It provides information about the opportunity cost
What type of line is a PPC
A curve
What are capital goods
Goods used in part of the production process such as machinery or factory buildings
What are consumer goods
Goods used for present use (consumption)
What do capital goods do in the long term
They increase future capacity in the economy, and expenditure on these goods is known as investment
Shifts in PPC and how that happens
There are shifts in PPC over a period of time due to capital goods being produced, as there are more resources available for production
What does a point outside the PPC represent
Producing at that level is not attainable yet with the current resources
Is opportunity cost a useful concept
Opportunity cost links to future events so it’s hard to place a value on
Alternatives are not always easy to quantify as they can both provide benefits and costs.
Moving along a PPC and what that means
It uses the same number of state resources but for different goods, for example more capital goods than consumer goods.
