Micro Flashcards
Ceteris Paribus
All things being equal; the assumption that whilst the effects of a variable are being investigated, all other variables are kept contant
Law of demand
As the price of a product decreases people want to buy more because they are more willing and able to do so - they can afford it
What will affect demand
Perceived value - quality, preferences, negative publicity, elasticity vs inelasticity, unresponsive people in the market
Positive economics
Making factual and objective claims when analysing economic relationships. Hypothesis is based off scientific facts which can be used to make a model - can be FACT checked so can be wrong or right
Normative economics
Concerned about how things SHOULD be and involved subjective and value judgements - opinions. ‘Should’ ‘Ought’ ‘Too little’ or ‘Too much’ . Not true or false but pure judgement.
Renewable resources
Resource produced faster than being used
Non-renewable resources
Resources who’s rate of consumption is faster than the rate of production
Opportunity cost
The next best alternative given u when making a decision
What does the PPC curve show
Shows the maximum combinations of 2 types of good that can be produced in an economy in a period if all the resources are being used efficiently and the state of technology is fixed
Scarcity
There are not enough resources to produce as many agricultural products and manufactured goods as the economy would like. All points beyond the PPC are unattainable given the current FoPs and state of technology
Efficiency
If the economy is using all its resources to their fullest extent possible and operating on the PPC this means it is achieving ‘productive’ efficiency. The economy is achieving productive efficiency when it is lying on the curve if it were under line this would mean that resources are not being used to their full capacity
Land
Resources that are extracted from nature
Labour
Human component - input in the production process. Requires knowledge, skills, can be both physical and mental.
Capital
The machinery + tools used in production
Enterprise
The factors that control + combines the other factors of production. The entrepreneur is the person who takes risk o set up the business in hope that is earns profit.
