Chapter 1 - What Economics Is all about Flashcards
What is the basic fact of economic life?
Scarcity
What is central to economics?
The relationship between unlimited wants & scarce resources
What are wants?
Human desires
What are needs?
Necessities like food & shelter
What are demands?
There is a demand for goods / service only if those who want to purchase it have the necessary means to do so. Purchase power.
Name the 3 types of resources - Factors of Production
1) natural resources - agri land, minerals, fishing
2) human resources - labour
3) man-made resources - machines
What is opportunity cost of a choice?
The value of the forgone opportunity
What does the production possibilities curve indicate?
The combination of any 2 goods / services that are attainable when community’s resources are fully & efficiently employed.
What is the purpose of economic activity?
To satisfy human wants
What are capital goods?
Goods that are not consumed but are used in the production of other goods
What are the 3 different categories of consumer goods?
1) non-durable goods eg. food
2) semi-durable goods eg. Shoes, blankets
3) durable goods - last a few years eg. Furniture, cars
What is economics essentially about?
- deals with the choices people have to make
- science of household management
- concerned with the ordinary business of life
Economic goods
a good that is produced at a cost from scarce resources. Most goods are economic goods
Free goods
A good that is not scarce & has therefore no price eg. Air, sunshine
Homogeneous goods
Goods that are exactly alike. Few such goods in world. a Fine ounce gold is an example.
Heterogeneous goods
Most goods - differentiated by brand. Eg. Bread, washing powder
Ways to increase production
- improved technique
- new technique
- increased resources eg. workers /
What does the possibilities curve illustrate?
Potential output
But does not indicate which of the possible combinations should be produced
Also hoe important it is to use scarce resources fully & efficiently
Ceteris paribus
Latin for : “all things being equal”
Economics is an empirical science, why?
Actual experiences are studied & measured
What is a positive statement?
Objective statement of fact
What is a normative statement?
Opinion or value judgement
Post hoc ergo proper hoc, means?
Latin for: “after this, therefore because of this”
Calculate % change between 2 figures
Eg. Change between 80 & 120 as % of 80
Subtract x from y
Decide by x
Multiply by 100
120 - 80=40
40 / 80 = 0,5
0,5 x 100 = 50
