micro chapter 1 Flashcards
what is the basic economic problem
people have an infinite amount of wants and needs, but a finite number of resources
define scarcity
a situation that arises as people have unlimited wants in face of limited resources
what are economic goods
goods that are scarce
define free goods
goods that are not usually regarded as being scarce (e.g earths atmosphere)
define poverty
situation in which individuals lack the basic necessities of life or have low incomes relative to their flow citizens
what are firms
an organisation that produces goods and services
compare positive to normative statements
positive statements are based on facts whereas normative involve value judgement on what ought to be
what are the three economic agents
firms
households
governments
what is the main motive of households
to maximise benefits
what is the main motive of firms
maximise profits
what is the main motive of governments
to maximise social well fare
what are the four factors of production and their benefits
land-rent
labour-wage
capital-interest
enterprise-profit
define opportunity costs
value of the next best alternative forgone
what is the production productivity curve
curve showing the maximum combination of two goods or services that can be produced in a set period of time given available resources
what does it mean if the point is within the PPC curve
-indicates inefficient use of resources
