Part 1 - Nature of economics Flashcards
What is the economic problem?
There are unlimited needs and wants but a finite amount of resources to meet these needs.
What’s a positive statement?
objective statements of fact that can be tested in experiments
What’s a normative statement?
ethical value judgements which are subjective and therefore cannot be proven or disproven
What is opportunity cost?
The benefit lost of not choosing the next best alternative
What are the factors of production (CELL)?
Capital, Enterprise, Land and Labour
What is Capital?
Goods used to produce consumer goods
What is enterprise?
Entrepreneurs who invent, innovate and organise the factors of production
What is land?
natural resources available for production
What is labour?
human input into production process
What is the production possibility frontier (PPF)?
represents maximum combination of goods or services that can be produced in a given period with available factors of production
(maximum productive potential of economy)
Why is the PPF curved?
not all factors of production equally suited to production of both goods
Reasons for outward shift of PPF
(increase in quantity or quality of FoP)
immigration
education and training
recovered land
higher retirement age
improved healthcare
Reasons for inward shift of PPF
(decrease in quality or quantity of FoP)
Natural disaster
War
Emigration
Declining birth rate
