Economic methodology and the economics problem Flashcards
allocative efficiency
when resources are allocated effectively to produce goods and services that maximise economic value
allocative price function
when prices allocate resources away from a market with excess supply to a market with excess demand
capital goods
goods used in the production of other goods
choice
selecting one of multiple alternatives when deciding how to allocate scarce resources
consumer goods
goods consumed by households and individuals used to satisfy needs and wants
economics welfare
The economic satisfaction/wellbeing of individuals/households/groups in an economy
factors of productions
inputs of the production process- CELL
finite resource
non- renewable resource that becomes increasingly scarce
fundamental economic problem
deciding how best to allocate resources in order to maximise economic welfare
imperfect information
when individuals lack the information to make the best decision
price incentive function
prices create incentives for people to adjust their economic transactions
need
something necessary for human survival
normative statements
a statement including value judgements that do can not easily be proven
opportunity cost
the value of the next best alternative forgone when making a decision
positive statements
statements including facts that can easily be disproved
production possibility frontier
A curve displaying the various possible combinations of two products that can be produced with finite resources
prices rationing function
prices rise to ration demand for goods
renewable resource
a resource that can be continuously replenished
scarcity
resulting from the concept of infinite wants and needs with limited resources
signalling price function
pricing provides information to buyers and sellers, influencing economic decisions
trade
buying and selling of goods and services
want
something desirable but not necessary for human survival
