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Micro-Economics > Economic Methodology & the Economic Problem > Flashcards

Economic Methodology & the Economic Problem Flashcards

1
Q

What is Economics?

A

Economics is the study of how humans make decisions when they face scarcity.

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2
Q

What do economics agents make decisions based of?

A
  • Political judgements
  • Short-term outcomes
  • Moral judgements
  • Normative statements
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3
Q

What is scarcity?

A

Scarcity means that our wants and needs are greater than the amount of available resources.

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4
Q

What does Ceteris Paribus mean?

A

All other things being equal.

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5
Q

What is a positive statement?

A

Positive statements describe the world as it is. They are objective statements that can be proved.

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6
Q

What is a normative statement?

A

Normative statements describe how the world should be. They are opinions that contain value judgements.

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7
Q

What is a value judgement?

A

They are judgements about society that cannot be quantified and tested.

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8
Q

What is the main purpose of economic activity?

A

The main purpose of economic activity is to produce goods and services in order to satisfy consumers wants’ and needs.

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9
Q

What are the foundation of economic decisions?

A
  • What goods/services we produce
  • How we produce those goods/services
  • Who we produce these goods/services for
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10
Q

What is the basic economic problem?

A

The basic economic problem involves working out how to allocate limited resources as effectively as possible to satisfy people’s unlimited wants and needs.

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11
Q

What is a need?

A

A need is a thing people cannot live without.

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12
Q

What is a want?

A

A want is a thing people can live without but desire

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13
Q

What are the 4 main economic resources?

A

Land, labour, capital and enterprise.

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14
Q

What is human capital?

A

The value human labour brings to the production process

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15
Q

What is labour force?

A

Labour force is the population who work

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16
Q

What is land?

A

Finite and non-finite resources found on the planet.

17
Q

What is enterprise?

A

The entrepreneurial actions that individuals take to try and make a profit.

18
Q

What is capital?

A

Capital is the equipment used to generate goods and services within the production process

19
Q

What do economic agents do?

A

Economic agents make decisions based on their various incentives.

20
Q

What is economic activity?

A

Production of goods (tangible) and services (non-tangible) and the consumption of these goods/services

21
Q

What are the 3 main economic agents?

A

Producers, consumers and governments.

22
Q

What are producers?

A

Producers are people/firms that produce goods or supply services

23
Q

What are consumers?

A

Consumers are people/firms who purchase the goods/services

24
Q

What are governments?

A

Governments establish rules for economies

25
Q

What is an oppurtunity cost?

A

The oppurtunity cost is the next best alternative foregone.

26
Q

In a Production Possibility Frontier, what is the oppurtunity cost?

A

It is the slope of the PPF

27
Q

How does PPF shift outwards?

A

If there is economic growth, this is because the productive capacity of the economy has increased.

28
Q

How do trade-offs occur on a PPF?

A

To produce more of one good, you must produce less of the other

29
Q

What does it mean if a point is underneath the PPF?

A

This means that not all economic resources are being deployed.

30
Q

What is efficiency?

A

Efficiency refers to a lack of waste.

31
Q

What is productive efficiency?

A

With all available inputs and technology, it is impossible to produce more of one good without decreasing the quantity of another good being produced. So, every point on the PPF is productively efficient.

32
Q

What is allocative efficiency?

A

It occurs when a specific combination of goods is efficient for society. As this is a specific combination of goods, it refers to a point on the PPF, not the entire curve. So, not every point on the PPF is allocatively efficient

Micro-Economics (2 decks)

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