Economic Methodology and the economic problem

Question 1

Allocative efficiency

Answer 1

Optimally distributing resources to match society’s desires.

Question 2

Allocative price function

Answer 2

The price level at which allocative efficiency is achieved, balancing supply and demand for maximum societal benefit.

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 else being equal. (constant)

Question 6

Choice

Answer 6

Selection made from available options or alternatives.

Question 7

Consumer good

Answer 7

Product or service intended for personal use and enjoyment by individuals.

Question 8

Economic welfare

Answer 8

Overall well-being and satisfaction of individuals within an economy.

Considering factors like income, utility, and quality of life.

Question 9

Enterprise

Answer 9

business organisation/ venture that utilise factors of production effectively

Question 10

Factors of production

Answer 10

The ability to utilise factors of production effectively (land, labour, capital)

Question 11

Finite resource

Answer 11

a 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 (food and 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

When no one can be made better off without making someone else worse off.

Question 22

positive statement

Answer 22

Statements including facts, that can be easily 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

rationing price function

Answer 24

prices rise to ration demand for goods

Question 25

renewable resources

Answer 25

restorable resource that can be replenished

Question 26

scarcity

Answer 26

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

Question 27

signalling price function

Answer 27

Prices provide information to sellers and buyers, influencing economic decisions

Question 28

Trade

Answer 28

buying and selling of goods and services

Question 29

Value judgements

Answer 29

statements that are subjective and based on opinion rather than factual evidence

Question 30

want

Answer 30

something desirable, yet not necessary for human survival