Chapter 1 : Economic methodology and the economic problem Flashcards
What is a hypothesis ?
An explanation of something.
What is a theory ?
A hypothesis that has been tested and survives the test.
What is a normative statement ?
A normative statement is a form of a value judgment that cannot be scientifically tested.
What is a positive statement ?
A statement that can be scientifically tested.
What is a value judgement ?
A value judgement is whether we believe if something is desirable or not.
What is an example of when value judgements are made ?
When government ministers make decisions on policy objectives.
What is a need ?
A need is something that is absolutely necessary for survival. An example is food.
What is a want ?
A want is something that you would like to have but isn’t necessary. It’s not need to survive. An example is a book.
What is economic welfare ?
Economic welfare is the economic well-being of an individual, a group within society or an economy.
What is a command (planned) economy ?
An economy in which government officials or planners allocate economic resources to other firms or productive enterprises.
What is a market economy ?
An economy is an economy in which goods and services are purchased through the price mechanism in a system of markets.
What is a mixed economy ?
A mixed economy is an economy in which planning mechanisms operate in both a large market sector and a large non-market sector.
What is production ?
Production is the process of converting inputs or factors of production into outputs of goods and services.
What is a capital good ?
A capital food is a good which is used in the production of other goods and services.
Ex. machinery
What is a consumer good ?
A consumer good is a good which is consumed by an individual or household to satisfy their needs or wants.
What are the factors of production ?
The factors of production are inputs into the production process such as land, labour, capital and enterprise.
Explain the factor of production ‘Land’
Land is natural resources that can be divided into renewable and non-renewable resources.
Explain the factor of production ‘Capital’
Capital is man-made physical equipment used to make other goods or services.
Explain the factor of production ‘Labour’
Labour is people involved in the production process, such as workers.
Explain the factor of production ‘Enterprise’
Enterprise is entrepreneurs who decide how much of factors of production to employ to a good or service. They decide what, how and who to produce for.
What is a renewable resource ?
A renewable resource is a resource that are reproducible but depend on the management of humans.
Ex. Forests, Animals, Water
What is a non-renewable resource ?
A non-renewable resource is a resource they cannot be renewed, they are scarce and run out after use.
Ex. Oil, gas, minerals
What are some scarce environmental resources ?
- Gases (hydrogen and oxygen)
- Physical resources (soil and water)
- Abstract resources (solar and wind energy)
What is the fundamental economic problem ?
The fundamental economic problem is the best way to make decision about the allocation of scarce resources to maximise economic welfare.
What is scarcity ?
Scarcity results from the fact that individuals have unlimited wants but the economy has limited resources to meet them.
What is a choice ?
A choice means choosing between alternatives when making decisions on how to use scarce resources.
What is a opportunity cost ?
An opportunity cost is the cost of giving up the next best alternative.
Ex. If an A-alevel student spends their evening playing computer games the opportunity cost is the lost opportunity to spend this time revising for their A-Levels
