Economic Methodology and the Economic Problem Defenitions

Question 1

Allocative efficiency

Answer 1

When economic resources are utilised to produce the combination of
goods and services that maximise economic welfare.

Question 2

Allocative price function

Answer 2

: Prices allocate resources away from markets with excess supply
to markets with excess demand.

Question 3

Capital

Answer 3

producer goods

Question 4

Capital/producer goods:

Answer 4

Goods used in the production of other goods.

Question 5

Ceteris paribus

Answer 5

All other things being held constant

Question 6

Choice

Answer 6

Selecting one of multiple alternatives when deciding how to allocate scarce
resources.

Question 7

Consumer good:

Answer 7

Goods consumed by households & individuals, used to satisfy needs and
wants.

Question 8

Economic welfare:

Answer 8

The economic satisfaction/wellbeing of individuals/households/groups in
an economy.

Question 9

Enterprise:

Answer 9

The ability to utilise factors of production effectively

Question 10

Factors of production:

Answer 10

Inputs of the production process, such as land, labour, capital and
enterprise

Question 11

Finite resource:

Answer 11

Non-renewable resource that becomes increasingly scarce.

Question 12

Fundamental economic problem

Answer 12

Deciding how to best allocate scarce resources to
maximise overall economic welfare.

Question 13

Imperfect information:

Answer 13

When individuals lack the information to make the best decision.

Question 14

Incentive price function:

Answer 14

: Prices create incentives for people to adjust their economic transactions

Question 15

Infrastructure

Answer 15

: Facilities required for an economy to function

Question 16

labour

Answer 16

: Workers with human capital

Question 17

land

Answer 17

Natural physical materials, as well as space for fixed capital

Question 18

need

Answer 18

Something necessary for human survival, e.g. food, shelter.

Question 19

Normative statement:

Answer 19

Statements including value judgements, that cannot be easily
proved/disproved.

Question 20

Opportunity cost:

Answer 20

: Loss of other alternatives due to selecting one of a set of options.

Question 21

Pareto efficiency:

Answer 21

State of resource allocation, where in order to make an economic agent
better off, another agent is made worse off

Question 22

Positive statement

Answer 22

Statements including facts, that can easily be proved/disproved.

Question 23

Production possibility frontier:

Answer 23

A curve displaying the various possible combinations of two
products that can be produced with finite resources.

Question 24

Production possibility frontier:

Answer 24

A curve displaying the various possible combinations of two
products that can be produced with finite resources.

Question 25

Rationing price function:

Answer 25

Prices rise to ration demand for goods.

Question 26

Renewable resource:

Answer 26

Restorable resource that can be replenished

Question 27

Scarcity:

Answer 27

Resulting from the concept of infinite wants and needs, yet limited resources.

Question 28

Signalling price function:

Answer 28

Prices provide information to sellers and buyers, influencing economic decisions.

Question 29

Trade:

Answer 29

Buying and selling of goods and services.

Question 30

Value judgements:

Answer 30

Value judgements: Statements that are subjective and based on opinion rather than factual evidence

Question 31

want

Answer 31

Something desirable, yet not necessary for human survive