Glossary Flashcards
Economics
A social science that studies human society and social relationships rather than a a natural science
Ceteris paribus
Latin for ‘all things being equal’
Rationality
Rational people will process all the information about each economic decision and choose the option that maximises utility(satisfaction)
Positive statement
A statement which can be supported or refuted by evidence
Normative statement
A statement which cannot be supported by evidence as it is a value judgement
Value judgement
An assessment of something as good or bad based on ones own standards and priorities
Land
The stock of raw materials
Sustainable resources
Renewable resources that are being used economically such that they wont diminish or run out
Non-sustainable resources
Renewable resources that are diminishing over time due to economic exploitation
Labour
The workforce of an economy
Human capital
The value to the economy that each worker brings with their unique set of characteristics
Capital
The manufactured stock of resources used in the production of goods and services
Working capital
The stock of raw materials, semi-manufactured and finished goods waiting in the production process to be sold to the consumer (resources that create the final product)
Fixed capital
The stock of materials that will not be transformed into the final product, but are used to transform working capital into finished products
Enterprise
The seeking of profitable opportunities for production
Rewards of the factor of production
The payments that the owners of the factors of production recieve for their use
Needs
The minimum that is necessary for a person to survive as a human being. People have finite needs.
Wants
Our desires of goods and services, wants are unlimited as we always want more of something
Scarcity
When demand for a good is higher than its supply and arises in all economies as wants are infinite and resources are finite
Basic economic problem
The need to allocate scarce resources between competing uses
Opportunity cost
The benefit lost from foregoing the next best option
Economy
A system which solves the basic economic problem by making three key economic decisions about how to use scarce resources to satisfy competing wants and needs
Economic agents
People that make the key choices within an economy
Households (economic agents)
Decide how much they will work and what to spend their earnings on
