Introductory Concepts Flashcards
What is ceteris peribus
With all other things being equal, what would the effect of…
What is a normative statement
A normative statement is something that suggests that you have an opinion about something
What is a positive statement
A positive statement is something that can be tested and are based on evidence
What is the economic problem
The economic problem is that consumers have unlimited needs and wants but the suppliers only have finite resources to fulfil the needs and wants
How does scarcity link to opportunity cost
When resources are particularly low, people are forced to make decisions that have an opportunity cost
What is a free good
A free good is a good in abundance and consumers don’t need to give effote to obtain it. I.e. air
What is an economic good
An economic good is one that is scarce in relation to it’s demand and human effote is required to obtain it
What is the production possibility frontier (PPF)
The PPF is a line on a graph that shows the maximum combination of goods that can be made assuming all FOP’s are used
What is a capital good
A capital good is one that is used in the production of future goods
What is a consumer good
A consumer good is a good that are bought and used by consumers
What is Adam smiths view on the division of labour
Adam smith believed that growth increases with the increased division and specialisation of labour
Define specialisation
Specialisation is where individuals, firms or countries focus on producing a narrow range of goods and services
Define the division of labour
The division of labour is where a firm specialises in producing a good or services and the production process is broken down into separate tasks
What is absolute advantage
Absolute advantage is being able to produce more of a good/service than another country
What is comparative advantage
Comparative advantage is being able to produce a good/service at a much lower opportunity cost than another country
