Introduction to Economics Flashcards
Opportunity Cost
The next best alternative foregone
Production Possibility Frontier (PPF)
A curve or a boundary which shows the combinations of two or more goods and services that can be produced whilst using all of the available factor resources efficiently.
What does Production of consumer goods determine?
The overall standard of living
Why will PPF shift out?
If there is an increase in resources available, an improvement in resource efficiency or a favourable change in technology
Positive Statement
This is a statement of fact which can be proven or disproven by statics or facts
Normative Statment
This is a statement of value which cannot be proven or disproven by facts or statics and often has words such as “fair”, “ought”, “should”
Sustainable development
Development which meets the needs of the present without compromising the ability of future generations to meet their own needs
Division of Labour
A process whereby the production procedure is broken down into a sequence of stages and workers are assigned particular tasks
Benefits of specialisation
- Higher output
- Variety
- Bigger Market
- Competition and lower prices
Limitations of division of labour
- May eventually reduce efficiency
- Increase unit costs
- Repetitive work lowers motivation and productivity
- ## Quality suffers
Laissez
Faire Economy
The Price Mechanism
The change market prices that acts as a signal to consumers and producers
Mixed Economy
Where there is a mixture of private decision making and central organisation
Three functions of the price mechanism
- Signalling function
- Transmission of preferences
- Rationing function
