Micro - Cycle 1 Flashcards
Difference between social and natural science
Social
- human behaviour
- can’t control variables
Natural
- natural world
- can control variables
What are the assumptions economists use
consumers maximise utility
firms maximise profit
consumers and firms are rational
what is Ceteris Paribus
All other factors remain constant
what is a positive statement
objective statement that can be tested with evidence
what is a normative statement
has a value judgement and are
subjective statements of opinion
What is the economic problem
Scarcity
What is scarcity
limited resources but unlimited wants
What are the factors of production
Land
Labour
Capital
Enterprise
As a FoP what is land
natural resources
As a FoP what is labour
human effort in production
As a FoP what is capital
man made aid to production - tech
As a FoP what is enterprise
organise the other factors of production
What is opportunity cost
next best alternative forgone when a choice is made
Importance of Opportuntiy cost for consumers
make choices to purchase goods and services
Importance of Opportuntiy cost for firms
make choices to produce goods and services
what does PPF stand for
Production possibility frontier
What does a PPF show
the maximum output of an economy with current FoP
what type of growth is a ppf outward shift
potential growth
what type of growth is a ppf point movement
actual growth (real GDP)
what does it mean if the gradient is constant in ppf
constant opp cost
similar goods
FoP’s equally good at making goods
what does it mean if the gradient is not constant on the ppf
not constant opp cost
goods are not similar
FoPs not equally good at making goods
what production is happening of a point is outside the ppf graph
impossible point of production
what production is happening of a point inside the ppf
inefficient point of production
not all FoP being used
