Economic Methodology + Economic Problem Flashcards
Positive Statement
A statement that describes/explains a phenomenon/relationship.It can be proved/tested as it’s based of factual observation/evidence and is purely objective with no value judgements or opinions
Normative Statement
It cannot be proved, usually halving value judgements and personal opinions with subjective evaluations
Economic Problem
There are scarce resources but infinite needs + wants
Want
Something desirable, but not necessary for human survival eg designer fashion
Need
Something necessary for human survival eg food, warmth or shelter
Economic Welfare
The economic well being of an individual/group within a society or economy
Trade-offs + Choices
Making a choice often involves a trade-off, choosing more of one thing can only be achieved by giving up something else
Opportunity Cost
The value of the next best alternative forgone when a choice is made.
Scarcity
A limited supply of resources to meet the wants + needs of a society
Production
A process/set of processes that concerts inputs into outputs of goods
Capital Good
A good used in the production of other goods/services
Consumer Good
A good consumed by individuals or households to satisfy wants/needs
Factors of Production
The inputs available to supply goods and services in an economy
Costs of Production
The costs of employing land, labour, capital + cost of entrepreneurs own services
Finite Resource
A resource which is scarce + runs out as its used
PPF
shows the maximum output of 2 goods/services an economy can produce given its available resources + technology, assuming full utilisation of resources + a fixed level of technology
Renewable Resource
A resource if used with careful management can be renewed as its used
Law of Diminishing Returns
Marginal output falls as we add extra resources
Pareto Efficency
Any point on the PPF, impossible to avoid opportunity cost
Pareto Improvement
When one individual becomes better off without someone becoming worse off
Productive Efficiency
Occurs when it is impossible to produce more of 1 good without producing less of another. There is an absence of waste in production and there is optimal production of goods at lowest point on short run average cost curve occurring on the PPF
Allocative Efficiency
Occurs when the available economic resources are used to produce the combination of goods + services that best fits peoples’ tastes + preferences
Economic Growth
Refers to an increase in Real GDP(Output) of an economy, where an economy is producing more goods and services than before
Economic Development
Looks at quality of economic growth through living standards, healthcare + education
