Overall Flashcards
What are positive statements?
Statements that are factual, e.g. CPI inflation was
2.7% in October 2012
What are normative statements?
Normative statements are opinions, e.g. increasing government spending is the government’s best option during a recession.
What are the factors of production?
Land, Labour, Capital and Enterprise
What is the fundamental economic problem?
Scarcity of factors of production
What is scarcity?
Scarcity is we are faced with finite resources and unlimited wants Because of scarcity, choices must be made as to how resources are allocated against a range of other possible uses. Therefore, resources carry an opportunity cost in their use.
What is opportunity cost?
Opportunity cost is the next best alternative/alternatives forgone.
What is a PPF?
Production Possibility Frontier
What does a PPF look like?
Look up on internet
How can the law of diminishing returns be applied to a PPF situation?
For example, by producing more carrots we
squander an increasing output of Onions just to
obtain a diminishing additional output of Carrots.
The same concept can be applied in reverse. These
trade offs explains the Bowed shape of the PPF.
What is economic growth represented by on a graph?
A shift outwards
What is negative economic growth represented by on a graph?
A shift inwards.
What can cause economic growth?
Improvements in Technology E.g.
Agricultural methods such as
genetically modified Carrots and
Onions making them immune to pests.
Improvements in Factors of production
efficiency behind the creation of
Carrots and Onions.
What is negative economic growth caused by?
Natural disasters E.g. Wildfire burning
the Onion and carrot crops.
What is demand?
Demand is the quantity of a good or service
that consumers in the market can buy for a
given price.
What factors affect demand?
Number of buyers Expectations (Expects a price increase) Season Fashion Income Price of complements Price of substitutes
