economic methodology and the economic problem definitions

Question 1

need

Answer 1

A need is something that is essential for maintaining life, such as air, water, food, shelter and sleep

Question 2

want

Answer 2

want is something that is desired by an individual or society

Question 3

economic welfare

Answer 3

economic welfare refers to the level of prosperity and quality of living standards in an economy. It can be measured through a variety of factors such as GDP.

Question 4

positive statement

Answer 4

is a statement that can be tested and verified and is not based on a value judgment . For example, stating that the current level of unemployment is 4.1% is positive because it can be tested and either verified or falsified

Question 5

normative statement

Answer 5

those that express a value judgment or preference on one outcome over another. They are ideologically prescriptive and cannot be verified or falsified using objective data analysis.

Question 6

factors of production

Answer 6

A country’s productive economic resources.The four main factors of production are: land, capital, labour and entrepreneurship.

Question 7

fundamental basic economic problem

Answer 7

The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources.

scaresecoonomic resources in comparison wity societys unlimited wants

Question 8

scarity

Answer 8

Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out.

Question 9

opportunity cost

Answer 9

the cost of the next best alternative that you give up when you have to make a choice

Question 10

PPF

Answer 10

A diagram that shows the maximum possible output combinations of two goods in an economy assuming a full and efficient employment of resources

Question 11

productive efficiency

Answer 11

it is the ability of an economy to produce goods and services at the lowest possible cost with resouces avaliable

When maximum output is produced from the available factors of production and when it is not possible to produce more of one good or service without producing less of another

Question 12

allocative efficiency

Answer 12

When an economy’s factors of production are used to produce the combination of goods and services that maximise the society’s welfare