Chapter 1 Flashcards
Define positive statement
economics that uses facts to describe and explain certain situations
YES OR NO: can positive statements be tested
Yes
Define negative statement
a statement that’s based on personal values
Define opportunity costs
the cost of giving up the next best thing
What is the opportunity cost of staying in bed
The opportunity cost is not going to work and losing pay
What is the opportunity cost of going to work
The opportunity cost is losing out on sleep
Why are opportunity cost a thing
As resources are scarce we have to make choices which causes an opportunity costs
Define capital goods
are used to make consumer goods and services
Define consumer goods
satisfy our needs and wants directly
Define consumer durables
products that provide a steady flow of satisfaction over their working life
Example of consumer services
E.g haircut
What diagram displays:
short term economic growth
Long term economic growth
recession
PPF DIAGRAMS
(Although they look different for each of the terms)
What does it mean when a point is on the PPF line
Any point on the PPF line means we are working productively – using all our resources well
What does it mean when a point is within
Inside the curve we are not using resources efficiently i.e unemployment, inflation
How can we get to a point that’s beyond the PPF line
We can get to the point but it would involve economic growth
What does it mean if the PPF is a straight line
The marginal opportunity cost of switching resources between consumer and capital goods is diminishing
What is the fundamental economic problem
There are unlimited wants that cannot be matched with limited resources
What are the 4 factors of production
Capital
Labor
Enterprise
Land
