defintions

Question 1

ceteris paribus

Answer 1

the assumption that all other things remain equal or constant

Question 2

positive statement

Answer 2

-positive statements are objective
-can be tested with factual evidence and consequently can be rejected or accepted

Question 3

normative statement

Answer 3

-normative statements are subjective
-based on value judgements and opinion rather than factual evidence

Question 4

what are the four factors of production?

Answer 4

1. capital
2. enterprise
3. land
4. labour

Question 5

land

Answer 5

e.g. natural resources
-considered scarce because there aren’t enough natural resources to satisfy the demand of everyone

Question 6

labour

Answer 6

-the work done by people who contribute to the production process
-people have different levels of education, experience etc, these factors can make people more ‘valuable’ or productive in the workplace - they have a greater amount of human capital

Question 7

capital

Answer 7

the equipment, factories and schools that help to produce goods or services

Question 8

enterprise

Answer 8

-the people (entrepreneurs) who take risks and create things from the other three factors of production
-they set up businesses using any of the three factors available to them
- the reward for risk-taking is profit

Question 9

what are the three economic agents?

Answer 9

1. producers
2. consumers
3. governments

Question 10

what’s a producer?

Answer 10

firms or people that make goods or provide services
-producers decide what to make and his much they’re willing to sell it for

Question 11

what’s a consumer?

Answer 11

people or firms who buy the goods and services
-decide what they want to buy and how much they’re willing to pay

Question 12

what’s a government?

Answer 12

sets the rules that other participants in the economy have to follow, but also produces and consumes goods and services
-they decide how much to intervene in the way consumers and producers act

Question 13

what’s a production possibility frontier (PPF)/ curve PPC?

Answer 13

the maximum possible output combinations of TWO goods/services using all available resources in the most efficient way with a given level of technology

Question 14

what’s a trade-off?

Answer 14

a trade-off is when you have to choose between conflicting objectives because you can’t achieve all of your objectives at the same time
-involves compromise

Question 15

opportunity cost

Answer 15

opportunity cost measures the value (benefit) of the next best alternative use of resources foregone