Economics Theme 1 The Nature Of Economics

Question 1

Model

Answer 1

A simplified representation of reality used to provide insight into economic decisions and events

Question 2

Ceteris Paribus

Answer 2

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

Question 3

Positive Statement

Answer 3

A statement about what is (i.e. about facts)

Question 4

Normative Statement

Answer 4

A statement that involves a value judgement about what ought to be

Question 5

Scarcity

Answer 5

A situation that arises when people have unlimited wants in the face of limited resources

Question 6

Opportunity Cost

Answer 6

In decision making, the value of the of the next - best alternative forgone

Question 7

Marginal Analysis

Answer 7

An approach to economic decision making based on considering the additional (marginal) benefits and costs of a change in behaviour

Question 8

Factors Of Production

Answer 8

Resources used in the production process; inputs into production particularly including Capital, entrepreneurship, land and labour

Question 9

Renewable Resources

Answer 9

Natural resources that can be replenished such as forests that can be replanted, or solar energy that does not get used up

Question 10

Non - Renewable Resources

Answer 10

Natural resources that once used cannot be replenished such as coal or oil