Economic Methodology and The Economic Problem Key Terms Flashcards
Positive Statement
Statement that can be proven true or false with facts, it is objective and testable
Normative Statement
subjective opinion that cant be proven true/false with facts
Need
something thats essential for human survival e.g food water shelter warmth
Want
something that’s desirable but not essential for survival e.g tesla
Economic Welfare
economic well being of an individual ,a group within society , or an economy
Production
process / set of processes that convert inputs into output of goods
Capital Good
good used in production of other goods/services
Capital Good also known as
Producer Good
Consumer Good
good which is consumed by individuals/households to satisfy their needs/wants
Factors Of Production
inputs into the production process
capital, enterprise, land, labour
finite resource
resource which is scarce and runs out as its used e.g oil
finite resource also known as
non renewable resource
Renewable resource
resource that with careful managment can be renewed as it’s used
Fundamental Economic Problem
How best to make descions about the allocation of scarce resources
among competing uses
so as to improve and maximise
human happiness and welfare
What is Scarcity
The fact people have unlimited wants but resources to meet these wants are limited
Opportunity cost
the cost of giving up the next best alternative
Production Possibility Frontier
Curve depicting the various combinations of two products that can be produced when all the available resources are fully and efficiently employed
Economic Growth
increase in the POTENTIAL level of real output the economy can produce over a period of time
Full Employment
when all who are able to and willing to work are employed
Unemployment
when not all who are able and willing to work are employed
Choice
choosing between alternatives when making a decision on how to use scarce resources
Resource Allocation
process which available factors of production assigned to produce different goods and services
Productive Efficiency
for the economy as a whole
occurs when it’s impossible to produce more of one good without producing less of anoher
Productive Efficiency
for a firm
occurs when the average total cost of production is minimised
