Micro 1 Flashcards
Normative statement
Subjective statements based on value judgements and opinions.
Possibility production frontier (PPF)
Depicts the maximum productive potential of an economy using the comvination of two goods or services.
Non renewable resources
Resources which cnnot be readily replenished or replaced at a level equal to consumption.
Renewable resources
Resources which can be readily replenished.
Economic problem
The problem of scarcity: wants are unlimited but resources are finite
Scarcity
The shortage of resources in relation to the quantity of human wants
Capital goods
Goods produced in order to aid production of consumer goods
Capital
One of four factors of production; goods which can be used in the production process
Ceteris paribus
All other things remaining the same
Social science
The study of societies and human behavior
Consumer goods
Goods bought and demanded by households and individuals
Division of labour
When a firm splits up its production process into smaller seperate tasks and assigns different workers to each of these tasks
Diminishing marginal utility
The extra benefit gained from consumption of a good generally declines as extra units are consumed
Enterprise
One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production.
Land
One of the four factors of production; natural resources
Mixed economy
Both the free market mechanism and the government allocates resources
Opportunity costs
The value of giving up the next best alternative
Efficiency
When resources are allocated optimally
Command economy
All factors of production are allocated by the state, so they decide what, how and for whom to produce goods
Habitual behavior
A cause of irrational behavior; when consumers are in the habit of making certain decisions
Rationality
Decision making that leads to economic agents maximising their utility
Specialisation
When a worker, firm or economy concentrates on producing a limited range of goods and services
Weakness of computation
A cause of irrational behavior; when consumers are bad at estimating future benefits/costs
Free market
An economy where the market mechanism allocates resources so consumers and producers make decisions about what is produced, how to produce and for whom
Model
A hypothesis which can be proven or tested by evidence
Labour
One of the four factors of production; human capital
Positive statement
Objective statements which can be tested with factual evidence to be proven or disproven
Utility
The satisfaction derived from consuming a good.
