Definitions (Unit1) Flashcards
Name the factors of production
Capital
Land
Labour
Define capital
Man made tools to aid production
Define land
Natural resources, raw materials converted into production
Define labour
The human element, skills, time, knowledge in production
Relative scarcity
The imbalance between unlimited wants and needs of a society but limited resources to produce them.
Opportunity cost
The value of the next best option foregone, what we give up in decision making
The productive possibility model
demonstrates the productive capacity of a nation using two products
Productive capacity
The potential maximum output when all resources are used at the best efficiency
Allocative efficiency
Combination of products that best satisfy societies wellbeing, singular point on PPF
Technical efficiency
Maximising out put per input at lowest costs
Underutilisation
When resources are not being used (all or not efficient)
What’s a peak?
The highest point in a buissness cycle when economic growth reaches its limit then reverses.
High spending, inflation and government action
What’s a trough?
The lowest point in a business cycle, when economic activity bottoms out before rising again
Low spending - high unemployment
What is a normative statement?
An opinion of value talking about how things should be
What is the PPC/PPF
Production possibility curve/frontier
Pure market
No government involvement
Mixed market
Some goverment involvement
Private sector
Firms/buissnesses producing, selling, profits
Public sector
Government taxes, taxes and spending, stabilise BC, income inequality
Relative prices
The price of one good or service in relation to another. Ratio of two prices
Market failure
A situation in which the market fails to allocate resources efficiently
Business cycle
Fluctuations in economic activity, consisting of peaks and troughs
What is a positive statement?
Fact, objective
What does PPF stand for
Production possibility frontier (curve)
