Microeconomics- nature of economics Flashcards
Why is economics classified as a social science ?
because they study the behaviour of people and groups
What is the difference between a natural science and a social science?
The difference in social sciences they study how humans behave and act whilst in natural sciences they study the natural world
What is a positive statement
a positive statement is an objective statement that can be tested and evaluated based on evidence
What is a normative statement
It is bias and opion based.
What is Ceterius Paribus
It is an assumption which means holding all other things constant to simplify things
What is a value judgement
Value judgements are moral beliefs about what is “good” or “bad”, “right” or “wrong”
What is the purpose of economic activity
to produce good and services to satisfy consumers needs and wants
What are the three economic decisions
what to produce
how to produce
and who is to benefit from goods/services produced
What is opportunity cost?
represents the potential benefits someone missed out on when choosing one alternative over another
What are the 4 factors of production
land, labour, capital, entrepreneurship
What is a ppf
A production possibility frontier- a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has
What causes an outward shift in the ppf
Higher productivity
increase in stock
innovation and invention of new products
What causes an inward shift of the PPF
high unemployment
external shocks - natural disasters
Why are the points on the PPF productively efficient
Because all resources are being used to produce the maximum possible output
Why are all the points on a PPF not allocatively efficiently
Because allocative efficiency refers to ripple getting what they want or need and not all the points on PPF will represent this
