Economics Flashcards
Market mechanisms
Where decisions on price and quantity are made on the basis of demand and supply alone
Economic system
The means by which choices are made in an economy
Market economy
One where most decisions are taken through market forces
Command or planned economy
One where resource allocation decisions are taken by a central body.
Mixed economy
One where market forces and government, private and public sectors are involved in resource allocation decisions.
Economic structure
The way in which an economy is organized in terms of sectors
Division of labor
Where a manufacturing process is split into a sequence of individual tasks
Market
Where buyers and sellers get together to trade
Specialization
The process by which individuals,firms and economics concentrate on producing those goods and services where they have an advantage over others
Normative statement
One that is subjective about what should happen
Positive statement
One that is based on empirical or actual evidence
Very long run
Time period when all key inputs into production are variable
Long run
Time period when all factors of production are variable
Short run
Time period when a firm can only change some and not all factor inputs
Ceteris paribus
A situation where other things remain equal
Opportunity cost
The cost expressed in terms of the best alternative that is forgone
Production
The process of creating goods and services in an economy
Consumption
The process by which consumers satisfy their wants
Decision made at margin means
People make decisions by comparing the cost of the benefit at the next action
Factors of production
Anything that is useful in the production of goods and services
Land
Natural resources in an economy
Labour
Human resources available in an economy
Capital
A man-made aid to production
Entrepreneur
Organizes production and is willing to take risks
