Key Info for Chapter 1 - Economic methodology and the economic problem Flashcards
Microeconomics
deals with individual decisions from households to firms in a particular market
macroeconomics
considers performance of the economy as a whole
Recession
decrease in GDP for two consecutive quarters
Social Science
the branch of science that studies society and the relationships of individuals within a society
Positive Statements
Statements that can be proven or disproven
Normative Statements
statements that cannot be scientifically supported and is based on a valued judgement and personal opinion
Inflation
a general increase in prices and fall in the purchasing value of money
Deflation
price increasing at a slower rate
Discretionary Spending
money left to spend on what you want after bills
Examples of physiological needs
Water, food, shelter, warmth
examples of emotional need
companionship
examples of wants
cars, holidays, designer clothes etc
define needs
necessity for human survival
define wants
something desirable but not necessary for human survival
economic welfare
economic wellbeing on an individual, a group within society or an economy
welfare
human happiness, more material goods tend to make people more happy
what are the 4 factors of production
land, labour, capital and enterprise
basic economic problem
demand for goods is high and the resource and supply is scarce
fundamental economic problem
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
scarcity
a situation that arises from the fact that people have unlimited wants but resources to meet this are unlimited
opportunity cost
the cost of giving up the next best alternative when the choice is made
consumer goods
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
Capital goods
goods such as raw materials and machines that are used to produce other goods. capital goods are very important for economic growth
In a PPF graph what does a point on the line mean
most efficient
In a PPF graph what does a point inside the line mean
inefficient
In a PPF graph what does a point beyond the line mean
not possible with current resources
In a PPF graph what does a straight line mean
Opportunity cost is constant
What does scarcity mean
unlimited wants vs limited resources
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
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
In a PPF graph, what happens to the quality and quantity to make the line move to the right?
increase
In a PPF graph, what happens to the quality and quantity to make the line move to the left?
decrease
List 4 examples of market only goods
Trains, planes, food, clothing
List 4 government only goods
Train tracks, roads, defence, fire service
List 5 government and market goods
healthcare, postal services, housing, pension, education
