Economic methodology and the economic problem (Micro) Flashcards
Learn about types of efficiency, methodology and scarcity
What is economics?
A social science which analyses consumer behaviour in markets through the use of positive and normative statements.
What is a positive statement?
An objective statement which can be tested against facts and so proven true or false.
What is a normative statement?
A subjective opinion or value judgement based, that can’t be proven true or false.
What is a need?
Something which people need to survive, eg food.
What is a want?
Something people think will improve their quality of life but do not need.
What is economic welfare?
The standard of living for an individual or collective society
What are the factors of production?
CELL, Capital, enterprise, land and labour (essentially just resources for producing goods)
What is the basic economic problem?
Scarce economic resources compared with unlimited wants.
What factors are considered with the basic economic problem?
What to produce
How to produce
Who gets it
What are the two types of market?
Free market (no government intervention) and Command or centrally planned economy.
What is an opportunity cost?
What is given up, the cost of the next best alternative that you give up when making a decision
What are economic goods?
Goods which use scarce resources
What are free goods?
Goods which are free of use (air) don’t use up scarce resources
What is a PPC curve?
The productive possibility curve, shows the maximum combination of two goods which can be produced assuming full employment
What might shift PPC outward?
Increased labour, increased productivity (education or training), new resources, technology
What else might PPC be called?
PPF
What is productive efficiency?
Maximum output is produced, can’t produce more of one thing without producing less of another
What is allocative efficiency?
When the economies resources are used so as to produce to maximise consumer welfare.
What else can productive efficiency be called?
Pareto efficiency
Where Is Pareto efficiency on PPF?
Anywhere on the curve
