Economic Methodology and the Economic Problem Flashcards
What are the four factors of production?
Capital, Enterprise, Land, Labour
What are the functions of price mechanism?
Allocative, Rationing, Signalling, Incentive
What is the Allocative function?
A new output is consolidated where the firm/market will be operating at allocative efficiency
What is the Rationing function?
The change in demand or supply can increase or decrease consumption
What is the Signalling function?
This is when there is a change in demand or supply within a market
What is the Incentive function?
A change in supply or demand can incentivise firms to increase/decrease output
Opportunity Cost?
The loss of other alternatives
Fundamental Economic Problem?
How to allocate scarce resources which having unlimited wants (limited resources and unlimited wants)
Pareto Efficiency?
A state where resources cannot be reallocated in order to make one person better off without making one worse off
Positive Statement?
This is a statement that includes facts so can be proved or disproved
Normative/Value Judgements?
This is a statement that is based off an opinion (subjective)
Gross National Product (GNP)
Market value of all products produced in one year by a country as well as GDP plus the income earned form oversees assets minus income earned by oversees residents
Gross National Income (GNI)
Sum of incomes of residents in an economy in a given period
