Economics Theme 1 Flashcards
What is the ‘ceteris paribus’ assumption?
‘Holding other things constant’ or ‘All other things being equal’
What is the Law of demand?
When all other things are equal, if the price decreases the demand increases and if the price increases the demand decreases
What is behavioural economics?
The impact of psychological, social and emotional factors on economic decisions
What is a positive statement?
An objective statement that can be tested and evaluated based on empirical research
What is a negative statement?
A subjective statement that carries value opinions bout what ought to be
What are the three economic questions?
What gets produced?
How it gets produced?
Who it gets produced for?
What are renewable resources?
Commodities that are inexhaustible or replaceable over time
What are finite resources?
Resources that cannot be renewed because no mechanisms exist to replenish them
What is opportunity cost?
The value of the next best option forgone
What are capital goods?
Goods used to make consumer goods and services
What are consumer goods?
Products which satisfy our needs and wants directly
What is productive efficiency?
When an economy is producing goods and services at the lowest possible cost
What is allocative efficiency?
When an economy is producing a mix of goods. Its represents real distribution to provide maximum overall satisfaction
What is division of labour?
When the production process is broken down into many separate tasks for each person to complete
What is learning by doing?
Acquiring knowledge, skills and expertise through direct hands on experience
