economic methodology + the economic problem Flashcards
Normative statement
A statement that includes a value judgement and cannot be refuted just by looking at the evidence
Positive statement
A statement of fact that can be scientifically tested to see if it is correct or incorrect
Need
Something that is necessary for human survival, such as food, clothing, warmth or shelter
Want
Something that is desirable, such as a mobile phone, but is not necessary for human survival
Economic welfare
The economic well-being of an individual, a group within society, or an economy
Economic system
The set of institutions within which a community decides what, how and for whom to produce
Market economy
An economy in which goods and services are purchased through the price mechanism in a system of markets
Command economy / Planned economy
An economy in which government officials or planners allocate economic resources to firms and other productive enterprises
Mixed economy
An economy that contains both a large market sector and a large non-market sector in which the planning mechanism operates
Production
Converts inputs or factor services into outputs of goods and services
Capital good / Producer good
A good which is used in the production of other goods or services
Consumer good
A good which is consumed by individuals or households to satisfy their needs or wants
Factors of production
Inputs into the production process (land, labour, capital and enterprise)
Renewable resource
A resource (e.g. timber) that with careful management can be renewed as it is used
Non-renewable resource / Finite resource
A resource (e.g. oil) that is scarce and runs out as it is used
Fundamental economic problem
How best to make decisions about the allocation of scarce resources among competing uses, so as to improve and maximise human happiness and welfare
Opportunity cost
The cost of giving up the next best alternative
Scarcity
Results from the fact that people have unlimited wants but resources to meet these wants are limited. In essence, people would like to consume more goods and services than the economy is able to produce with its limited resources
Choice
Choosing between alternatives when making a decision on how to use scarce resources
Production possibility frontier
A curve depicting the various combinations of two products (or types of product) that can be produced when all the available resources are fully and efficiently employed
Technical progress
New and better ways of making goods and new techniques for producing more output from scarce resources
Economic growth
The increase in the potential level of real output the economy can produce over a period of time
Full employment
When all who are able and willing to work are employed
Unemployment
When not all of those who are able and willing to work are employed
