Economic Methodology And The Economic Problem

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

Ceteris Paribus

Answer 4

All other things being held constant/ everything remains equal

Question 5

Consumer goods

Answer 5

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

Question 6

Economic welfare

Answer 6

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

Question 7

Enterprise

Answer 7

The ability to utilise factors of production effectively

Question 8

Factors of production

Answer 8

Capital
Enterprise
Land
Labour

Question 9

Finite resources

Answer 9

Non renewable resource that becomes increasingly scarce

Question 10

Fundamental economic problem

Answer 10

Deciding how to best allocate scarce resources to maximise overall economic wellfare

Question 11

Imperfect information

Answer 11

When individuals lack the information to make the best decision

Question 12

Incentive price function

Answer 12

Prices create incentives for people to adjust their economic transactions

Question 13

Infrastructure

Answer 13

Facilities required for an economy to function

Question 14

Labour

Answer 14

Workers with human capital

Question 15

Land

Answer 15

Natural physical materials, as well as space for fixed capital

Question 16

Need

Answer 16

Something necessary for human survival

Question 17

Normative statement

Answer 17

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

Question 18

Opportunity cost

Answer 18

Loss of other alternatives due to selecting on set of options

Question 19

Pareto efficiency

Answer 19

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

Question 20

Positive statement

Answer 20

Statements including facts, that can be easily proved/disproved

Question 21

Production possibility frontier (PPF)

Answer 21

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

Question 22

Rationing price function

Answer 22

Prices rise to ration demand for goods

Question 23

Renewable resources

Answer 23

Restorable resource that can be replenished

Question 24

Scarcity

Answer 24

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

Question 25

Signalling price function

Answer 25

Price provide information to sellers and buyers, influencing economic decisions

Question 26

Trade

Answer 26

Buying and selling of goods and services

Question 27

Value judgements

Answer 27

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

Question 28

Want

Answer 28

Something desirable, yet not necessary for human survival