Micro 1: What is Economics? Flashcards
What is the fundamental economic problem?
Resources are scarce while the wants of individuals are unlimited.
When is economic activity taking place?
Any time people provide a good or service using resources in order to satisfy the needs or wants of themselves or others. Eg. a gardener using land to grow fruit and vegetables to fulfill the need for food. The conversion of resources into goods and services.
What is opportunity cost?
The value of the next best option which is forgone when an economic decision is made. It’s a benefit that could have been enjoyed within an economy which has to be given up or sacrificed in order to enjoy a different benefit.
What is economics classified as?
A social science.
What are positive statements?
These are statements that are used to describe reality and could in theory be shown to be true or false.
What are normative statements?
These are usually seen to be matters of opinion which cannot be shown to be true or false.
What is value judgement?
A judgement about what is good or bad, important or valuable, based upon subjective opinion, which informs economic and political decision making.
What is a social science?
Scientific study (systematic study to gain knowledge and understanding of the world) of human interaction and social relationships.
What is scarcity?
The state of being in short supply, especially relative to how much something is demanded.
What are the key economic decisions that have to be made by economic decision/ policy makers?
Resources are scarce and people have infinite wants so decisions have to be made about how to most effectively use the resources, which goods and services to produce and provide using the scarce resources and in what quantities, how the goods and services should be produced (labour or capital intensive?) They also have to decide who should receive the goods produced.
