Nature of Economics Vocabulary Flashcards
Land
Natural resources that can be used in production e.g. trees, oil, cows
Labour
Human resources that can be used in production
Capital
Stock of manufactured (man-made) resources used to produce finished goods and services
Enterprise
The organisation of the factors of production (land, labour, capital) using the entrepreneur’s own money
Basic Economic Problem
Resources have to be allocated between competing uses because wants are infinite whilst resources are scarce
Opportunity cost
The value of the next best alternative forgone
Non-renewable resources
Resources which once exploited in such a way that it is being reduced over time e.g. oil
Renewable resources
Resources, such as fish stocks or forests, which can be exploited over and over again because they have the potential to renew themselves
PPF
A boundary that shows the maximum combinations of two or more goods and services that can be produced when all resources are used efficiently
Consumer goods
Goods consumed by households/individuals
Positive statement
An objective statement that is a fact can be tested
Normative statement
A subjective statement containing a value judgement, which cannot be proved or disproved
Specialisation
A method of production where a firm or country focuses on the production of a limited scope of products or services to gain greater productive efficiency
Division of Labour
The breaking down of a production process in smaller, specific tasks, intended to increase productivity
Productivity
A measure of efficiency: output per unit of input e.g. labour productivity = output per worker
Economic System
The methods by which societies organise what is produced, how it’s produced and for whom to produce
Free market economy
When the price mechanism (supply and demand) allocates resources
Command economy
When the government allocated resources
Mixed economy
Resources are allocated through a combination of the price mechanism and the government
