Key Terms Flashcards
What is meant by law in economics
A theory or model which has been verified by empirical evidence
What is normative economics
The study and presentation of policy prescriptions involving value judgments about the way in which resources are allocated
Positive economics
Objective study if allocation of resources
Positive statement
Supported and refuted by evidence
Normative statement
Cannot be refuted or supported cause value of judgements
Nominal values
Values unadjusted for the effects of inflation
Real values
Values adjusted for inflation
Capital goods
Goods that are used in the production of other goods e.g. office,roads
Consumer goods
Goods and services that are used by people to satisfy their needs and wants
Capital productivity
Output per unit of capital employed
Division of labour
Specialisation by workers who perform different tasks at different stages to make a good or service
Labour productivity
Output per worker
Primary sector
Extractive and agricultural industries
Private sector
The part of the economy owned by individuals companies and charities
Public sector
The part of the economy where production is organised by the state or the government
Mixed economy
Economy where both the free market mechanism and the government planning process allocate significant proportion of total resources
Utility
The satisfaction or benefit derived from consuming a good or a set of goods
Demand
The price consumer are paying liking and able to pay
Consumer surplus
Difference between how much buyers are prepared to pay for a good and what they actually pay
Contraction of demand
When QD for a good falls because it’s price rises
Law of diminishing marginal utility
The value or utility that individual consumers gain from one last product consumed falls the greater the number consumed
— the more you have of one product the less tasteful it is and say I had 2 chocolate bars then the third one won’t be as nice as the other two
Complement
A good purchased with other goods to satisfy a want. They have a negative cross elasticity of demand
Inferior good
A good where demand falls when income increases
