Economics keyterms #1 Flashcards
Define scarcity
A situation that arises because people have unlimited wants in the face of limited resources.
Define poverty
an extreme form of scarcity, in which individuals lack the basic
necessities of life.
Outline difference between a want and a need
A need is a something which is necessary for human life, for example food and water. While a want is something people would prefer to do or have but isn’t necessary for life.
What is marginal principle?
the idea that
economic agents may
take decisions by
considering the effect of
small changes from the
existing situation
Define Microeconomics
the study of economic decisions taken by
individual economic agents, including
households and firms
Define macroeconomics
the study of the interrelationships
between economic variables at an
aggregate ( whole economy-wide) level
Define Model
a simplified representation of reality used to provide insight into economic decisions
and events.
Define opportunity cost
in decision making, the value of the next-best alternative is rejected in favour of your chosen option.
What is a positive statement? (Include an example)
Statement: a statement about what
is, i.e. about facts. (the economists are being asked by the government to use economic analysis to forecast what will happen when the tax is increased.)
What is a normative statement (Include an example)
a statement involving a value judgement that is about what ought to be. It involved a value judgement. (the government asks whether it should raise the tax on cigarettes.)
What is a value judgement and what type of analysis is it involved in?
a statement based on your opinion or beliefs, rather than on facts. It is involved to form a normative analysis.
Define ceteris paribus
a Latin phrase meaning ‘other
things being equal’; it is used in economics when we focus on changes in one variable while holding other influences constant. A way of simplifying reality for their questions.
What are the factors of production?
resources used in the production process;
inputs into production, including labour,
capital, land and enterprise.
What is labour?
A human resource input into production.
