Micro - Economic Methodology & the Economic Problem Flashcards
What is allocative efficiency?
When economic resources are utilised to produce the combination of goods and services that maximise economic welfare.
What is the allocative price function?
Prices allocate resources away from markets with excess supply to markets with excess demand.
What are capital/producer goods?
Goods used in the production of other goods.
What does ceteris paribus mean?
All other things being held constant.
What is choice in economics?
Selecting one of multiple alternatives when deciding how to allocate scarce resources.
What are consumer goods?
Goods consumed by households & individuals, used to satisfy needs and wants.
What is economic welfare?
The economic satisfaction/wellbeing of individuals/households/groups in an economy.
What is enterprise?
The ability to utilise factors of production effectively.
What are factors of production?
The resources used to produce goods and services.
What is a finite resource?
Non-renewable resource that becomes increasingly scarce.
What is the fundamental economic problem?
Deciding how to best allocate scarce resources to maximise overall economic welfare.
What is imperfect information?
When individuals lack the information to make the best decision.
What is the incentive price function?
Prices create incentives for people to adjust their economic transactions.
What is infrastructure?
Facilities required for an economy to function.
What is labour?
Workers with human capital.
What is land in economics?
Natural physical materials, as well as space for fixed capital.
What is a need?
Something necessary for human survival, e.g., food, shelter.
What is a normative statement?
Statements including value judgements, that cannot be easily proved/disproved.
What is opportunity cost?
Loss of other alternatives due to selecting one of a set of options.
What is Pareto efficiency?
State of resource allocation, where in order to make an economic agent better off, another agent is made worse off.
What is a positive statement?
Statements including facts, that can easily be proved/disproved.
What is a production possibility frontier?
A curve displaying the various possible combinations of two products that can be produced with finite resources.
What is the rationing price function?
Prices rise to ration demand for goods.
What is a renewable resource?
Restorable resource that can be replenished.
