Micro Economics - Theme 1 Flashcards
what does ceterius paribus mean?
assuming all other things are equal - used to isolate specific variables
what is the law of demand?
as the price of good/service decreases, the demand increases. - inverse relationship
what are positive statments?
objective statements based on empirical evidence ( facts ) not opinions. key words include ( WILL )
which of the following are positive statements?
1) the government should increase taxes
2) taxes on high income earners should be raised to decrease inequality
3) an increase in consumer income tends to higher demand for normal goods
3
what are normative statments?
norms - society beliefs so are statements based on opinions and are subjective
what are the attributes of a normative statement?
uses subjective arguments and value judgements ( not testable or objective )
what is the economic problem?
Scarcity - unlimited wants and needs but limited resources to satisfy those needs
how to reduce economic problem?
opportunity costs
what is scarce resources called?
economic goods and all involve an opportunity cost m
what is the definition of opportunity cost?
the next best alternative as a result of choice being made
what are some examples of factors of production/economic resources?
1) Land
2) Labour
3) Capital
4) Enterprise
what are the three questions asked when solving economic problem?
1) what
2) for whom
3) how
what does the production possibility frontier ( PPF ) curve represent?
shows the maximum level of output of two goods/services that an economy can produce using its available resources and technology
