ECON EXTRA Flashcards
What is ceterius paribus
“all other things remain constant”
What is a positive statement
Positive economics or statements can be tested objectively and can be proven to be true or false.
Examples are “What is the unemployment rate” or “What will happen to the demand for cigarettes if we remove a sales tax”.
What is a normative statement
Normative economics on the other hand are subjective statements. They are opinions or value judgments that cannot be tested.
Examples are “The unemployment rate is too high” or “The government should tax cigarettes”. Other statements that answer “What should be done?” are normative statements.
What is a free good
a resource, such as sunlight or air, which is so abundant that its availability is not a constraint on economic activity.
What are natural resources
These are resources that are naturally occurring.
The law of increasing opportunity cost
As you increase the production of one good, the opportunity cost to produce the additional good will increase.
Human Resources
These refer to the quantity and quality of the labour force
Explain the trade-off that is required between capital goods and consumption goods.
It is the tradeoff between present and future consumption
Sacrificing some current consumption(consumer goods) enables resources to be diverted and and used to produce capital goods. Capital goods are seen as investments for economic growth which enables higher standard of living
Enterprise
It is the coordination and management of the production of goods and services by an entrepreneur. Enterprise also represents the ideas and skills which are needed to create new goods and services.
Capital Resources
These are the human made resources which assists human resources in the production of goods and services. Capital resources can be physical capital, which are tools and equipment and machinery.
What type of people do economists assume everyone is
Economists assume that people are rational and respond to incentives.
A rational person is someone who compares the costs and benefits of a decision before acting.
Rational decision is when the benefits outweigh the cost
