Chapter 1 Flashcards
Define scarcity
Resources or Factors of production are finite, whereas wants are infite
4 factors of Production
1.land
2.Labour
3.Capital
4.Entrepreneaurship
4 sub parts of Capital
- physical
- human
- natural
- Financial
3 question of Economy and their realtion with resource allocation and income distribution
Resource allocation
- What to produce
- How to Produce
Income Distribution
- For whom to produce
Define Opportunity cost
The next best alternative that must be given up in order to obtain something else
3 types of economy and their characteristic
- Free market
- Private sector resource ownership and economic decision making
- Price rationing - Planned Economy
- Public sector resource ownership and economic decision making
- Non- Price rationing - Mixed economy/ Mixed market economy
- Publicand Private sector resource ownership and economic decision making
- Non- Price and Price rationing
What is PPC
Production possibilty Curve
- repreasents all combinations of the maximum ammount of two goods that can be produced by an economy
Actual Growth in PPC
Movemnet inside the PPC caused by reduction in employment and increase in product efficiency
Potential Growth
Movemenet of the PPC
Caused by grwoth in production posssibilities ( increase in quantity, improvemnet in quality and increased improvement of technologucal innovation.
Movement in PPC
Right shift = increase in production possibilities
Left shift = decrease in production possibilities
What does Circular flow of Income show
in any given time period the value of output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditure made to purchase that output
Positive and Normative
Positive: Facs about the economy
Normative: based on belifes or values
