Definitions-Topic 1: Economic Methodology And The Economic Problem Flashcards
Allocative efficiency
When economic resources are utilised to produce the combination of goods and services
Allocative price function
Prices allocate resources away from markets with excess supply to markets with excess demand
Capital
Producer goods
Capital/producer goods
Goods used in the production of other goods
Ceteris paribus
All other thing things being held constant
Choice
Selecting one of multiple alternatives when deciding how to allocate scare resources
Consumer good
Goods consumed by households & individuals , used to satisfy needs and wants
Economic welfare
The economic satisfaction/wellbeing of individuals /households/groups in an economy
Enterprise
The ability to utilise factors of production effectively
Factors of production
Inputs of production process, such as land , labour , capital and enterprise
Finite resources
Non-renewable resource that becomes increasingly scarce
Fundamental economic problem
Deciding how to best allocate scarce resources to maximise overall economic welfare
Imperfect information
When individuals lack the informations to make the best decision
Incentive price function
Prices create incentives for people to adjust their economic transactions
Infrastructure
Facilities required for an economy to function
Labour
Workers with human capital
Land
Natural physical materials , as well as space for fixed capital
Need
Something necessary for human survival
Normative statement
Statements including value judgements,that Cannot be easily proved/disproved
Opportunity cost
Loss of other alternatives due to selecting one of a set of options
Allocative efficiency
State of resource allocation , wherein order to make an economic agent better off, another agent is made worse off
Positive statement
Statements including facts , that can easily be proved / disproved
Production possibility frontier(PPF)
A curve displaying the various possible combinations of two products that can be produced with finite resources
Rationing price function
Prices rise to ration demand for goods
