Economic Methodology + Economic Problem

Question 1

Positive Statement

Answer 1

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

Question 2

Normative Statement

Answer 2

It cannot be proved, usually halving value judgements and personal opinions with subjective evaluations

Question 3

Economic Problem

Answer 3

There are scarce resources but infinite needs + wants

Question 4

Want

Answer 4

Something desirable, but not necessary for human survival eg designer fashion

Question 5

Need

Answer 5

Something necessary for human survival eg food, warmth or shelter

Question 6

Economic Welfare

Answer 6

The economic well being of an individual/group within a society or economy

Question 7

Trade-offs + Choices

Answer 7

Making a choice often involves a trade-off, choosing more of one thing can only be achieved by giving up something else

Question 8

Opportunity Cost

Answer 8

The value of the next best alternative forgone when a choice is made.

Question 9

Scarcity

Answer 9

A limited supply of resources to meet the wants + needs of a society

Question 10

Production

Answer 10

A process/set of processes that concerts inputs into outputs of goods

Question 11

Capital Good

Answer 11

A good used in the production of other goods/services

Question 12

Consumer Good

Answer 12

A good consumed by individuals or households to satisfy wants/needs

Question 13

Factors of Production

Answer 13

The inputs available to supply goods and services in an economy

Question 14

Costs of Production

Answer 14

The costs of employing land, labour, capital + cost of entrepreneurs own services

Question 15

Finite Resource

Answer 15

A resource which is scarce + runs out as its used

Question 16

PPF

Answer 16

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

Question 16

Renewable Resource

Answer 16

A resource if used with careful management can be renewed as its used

Question 17

Law of Diminishing Returns

Answer 17

Marginal output falls as we add extra resources

Question 17

Pareto Efficency

Answer 17

Any point on the PPF, impossible to avoid opportunity cost

Question 18

Pareto Improvement

Answer 18

When one individual becomes better off without someone becoming worse off

Question 19

Productive Efficiency

Answer 19

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

Question 20

Allocative Efficiency

Answer 20

Occurs when the available economic resources are used to produce the combination of goods + services that best fits peoples’ tastes + preferences

Question 21

Economic Growth

Answer 21

Refers to an increase in Real GDP(Output) of an economy, where an economy is producing more goods and services than before

Question 22

Economic Development

Answer 22

Looks at quality of economic growth through living standards, healthcare + education