Key Info for Chapter 1 - Economic methodology and the economic problem Flashcards

1
Q

Microeconomics

A

deals with individual decisions from households to firms in a particular market

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2
Q

macroeconomics

A

considers performance of the economy as a whole

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3
Q

Recession

A

decrease in GDP for two consecutive quarters

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4
Q

Social Science

A

the branch of science that studies society and the relationships of individuals within a society

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5
Q

Positive Statements

A

Statements that can be proven or disproven

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6
Q

Normative Statements

A

statements that cannot be scientifically supported and is based on a valued judgement and personal opinion

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7
Q

Inflation

A

a general increase in prices and fall in the purchasing value of money

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8
Q

Deflation

A

price increasing at a slower rate

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9
Q

Discretionary Spending

A

money left to spend on what you want after bills

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10
Q

Examples of physiological needs

A

Water, food, shelter, warmth

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11
Q

examples of emotional need

A

companionship

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12
Q

examples of wants

A

cars, holidays, designer clothes etc

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13
Q

define needs

A

necessity for human survival

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14
Q

define wants

A

something desirable but not necessary for human survival

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15
Q

economic welfare

A

economic wellbeing on an individual, a group within society or an economy

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16
Q

welfare

A

human happiness, more material goods tend to make people more happy

17
Q

what are the 4 factors of production

A

land, labour, capital and enterprise

18
Q

basic economic problem

A

demand for goods is high and the resource and supply is scarce

19
Q

fundamental economic problem

A

how to make the best decisions about the allocation of scarce resources amongst competing uses so as to improve and maximise human happiness and welfare

20
Q

scarcity

A

a situation that arises from the fact that people have unlimited wants but resources to meet this are unlimited

21
Q

opportunity cost

A

the cost of giving up the next best alternative when the choice is made

22
Q

consumer goods

A

goods bought by individuals and households to satisfy their wants and needs. goods such as iPods and TVs are consumer durable goods, food and washing powder and nondurable consumer goods

23
Q

Capital goods

A

goods such as raw materials and machines that are used to produce other goods. capital goods are very important for economic growth

24
Q

In a PPF graph what does a point on the line mean

A

most efficient

25
In a PPF graph what does a point inside the line mean
inefficient
26
In a PPF graph what does a point beyond the line mean
not possible with current resources
27
In a PPF graph what does a straight line mean
Opportunity cost is constant
28
What does scarcity mean
unlimited wants vs limited resources
29
What does productive efficiency mean
For the economy as a whole, this occurs when it is impossible to produce more of one good without producing less of another. For an individual firm, this occurs when the average total cost of production is minimised
30
What does allocative efficiency mean
Occurs when the available resources are used to produce the combination of goods and services that best matches people's taste and preferences
31
In a PPF graph, what happens to the quality and quantity to make the line move to the right?
increase
32
In a PPF graph, what happens to the quality and quantity to make the line move to the left?
decrease
33
List 4 examples of market only goods
Trains, planes, food, clothing
34
List 4 government only goods
Train tracks, roads, defence, fire service
35
List 5 government and market goods
healthcare, postal services, housing, pension, education