Economic Methodology and The Economic Problem Key Terms

Question 1

Positive Statement

Answer 1

Statement that can be proven true or false with facts, it is objective and testable

Question 2

Normative Statement

Answer 2

subjective opinion that cant be proven true/false with facts

Question 3

Need

Answer 3

something thats essential for human survival e.g food water shelter warmth

Question 4

Want

Answer 4

something that’s desirable but not essential for survival e.g tesla

Question 5

Economic Welfare

Answer 5

economic well being of an individual ,a group within society , or an economy

Question 6

Production

Answer 6

process / set of processes that convert inputs into output of goods

Question 7

Capital Good

Answer 7

good used in production of other goods/services

Question 8

Capital Good also known as

Answer 8

Producer Good

Question 9

Consumer Good

Answer 9

good which is consumed by individuals/households to satisfy their needs/wants

Question 10

Factors Of Production

Answer 10

inputs into the production process

capital, enterprise, land, labour

Question 11

finite resource

Answer 11

resource which is scarce and runs out as its used e.g oil

Question 12

finite resource also known as

Answer 12

non renewable resource

Question 13

Renewable resource

Answer 13

resource that with careful managment can be renewed as it’s used

Question 14

Fundamental Economic Problem

Answer 14

How best to make descions about the allocation of scarce resources

among competing uses

so as to improve and maximise
human happiness and welfare

Question 15

What is Scarcity

Answer 15

The fact people have unlimited wants but resources to meet these wants are limited

Question 16

Opportunity cost

Answer 16

the cost of giving up the next best alternative

Question 17

Production Possibility Frontier

Answer 17

Curve depicting the various combinations of two products that can be produced when all the available resources are fully and efficiently employed

Question 18

Economic Growth

Answer 18

increase in the POTENTIAL level of real output the economy can produce over a period of time

Question 19

Full Employment

Answer 19

when all who are able to and willing to work are employed

Question 20

Unemployment

Answer 20

when not all who are able and willing to work are employed

Question 21

Choice

Answer 21

choosing between alternatives when making a decision on how to use scarce resources

Question 22

Resource Allocation

Answer 22

process which available factors of production assigned to produce different goods and services

Question 23

Productive Efficiency

for the economy as a whole

Answer 23

occurs when it’s impossible to produce more of one good without producing less of anoher

Question 24

Productive Efficiency

for a firm

Answer 24

occurs when the average total cost of production is minimised

Question 25

Allocative Efficiency

Answer 25

available economic resources are used to produce the combo of goods and services that best matches people’s tastes and preferences