economic methodology and the economic problem Flashcards
define positive and normative statements .
positive statement; a statement of fact that can be scientificially tested to see if its correct or incorrect.
normative statement; value judgement cant be scientifically tested as ppl have diff views on what is right or wrong ( include ethical/ moral judgements)
what is an example of the impact of moral and political judgements
US president donald trump 2018 decision to implement a zero tolerence policy on illegal immigrants in the USA.
- splitting adult immigrants from their children despire their ages and keeping the children in wire cages along us border w mexico. on other grounds the policy was quickly abandoned.
list and define the factors of production.
LAND;
- as well as territory this includes all of earths natural resources ( non renewable resources eg natural gas, oil,fossil feuls. renewable ( wind / tidal power. water. animals found in the area)
- they are all scarce except air but it can be polluted)
reward/incentive = rent
LABOUR;
- work done by ppl who contribute to production process
reward/ inventive= wages
CAPITAL;
- equipment used in producing goods/ services, capital is different from land as it has to be made first.
-much of an economys capital is paid by the gov.
reward/ incentive=interest from the investment
ENTERPRISE;
managerial ability
-refers to ppl ( entrepeuneurs ) who take risks and who create things from the other 3 factors of production).
reward/ incentive= profit , incentive to take risks
define economic activity and the purpose of it
economic activity involves combining the factors of production to create outputs that ppl can consume .
purpose is to increase economic welfare by creating products that satisfy their various wants and needs.
what are the 3 economic agents
producers, consumers, government
what is an economic system in which goods and service are purchased thru a price mechanism in a system of markets
market economy
what is an economic system in which gov officials allocate economic resources to firms or other producive enterprises
command or planned economy
outline a mixed economy
between 2 extremes ( command economy or market economy ), esepecially those of the developed countries in western europe eg UK are called mixed economies .
- contains both a large market sector and large non- market sector
what is the nature and purpose of economic activity
produce goods and services which satisfy consumers needs and wants
economicsts have to make decisions on how to use scarce resources:
1) what is to be produced ? - take into account problem of opportunity cost
2) how should it be produced ? - firms aim to minimise costs and maximise profit so production needs to be effecient
3) who will benefit from the goods/ services produced
what is a key point about renewable resources
can be replenished ,stock level of the resources can be maintained over time
however if resource is consumed faster than its renewed = stock of resource will decline over time
however ts can be managed by preventing or limiting deforestation or imposimg fish quotas
THE WORLDWIDE FUND FOR NATURE CLAIMS THAT 2 PLANETS WILL BE REQUIRED TO MEET GLOBAL DEMAND BY 2050
what is the price mechanism in a pure market economy
system where market allocates scarce resources among competing uses using supply and demand
what are 2 barriers that can disrupt market operations
transport costs and lack of info
how have modern developments helped markets become more global
improving transport effeciency and enabling faster info through technology
what is a complete command economy
economy where all decisions about production and allocation are made by a central planning authoirty for eg the gov
why is a pure planned economy only theoretical
no real world economy operates entirely under central planning
what happened to command economies of eastern europe before 1990
production was planned
there were shortages and fixed price led to poor quality consumer goods
which countries are still considered communist but have moved towards market economies
china
north korea
vietnam
cuba
how has chinas eocnomy evolved in the past few years
it has become more capitalist than the usa in some aspects, leading to term state capitalism
define capital good AKA producer good
a good which is produced in the production of other goods and services
define consumer good
a good consumed by individuals or households to satisfy their needs and wants
what does george monobiot argue about economic growth
hes a british writer known for his environmental and political activism.
he claims economics promotes belief of perpetual growth but humanity is exceeding the planets physical limits
what problem does a 3% global growth rate cause
it doubles world economy every 24 years, worsening environmental crises at an unsustainable rate
when did UK economy develop to a mixed one
after ww2 1945
what is opportunity cost
cost of giving up the next best alternative
