Scarcity and Choice Flashcards
Define positive economics
Dealing with the objective or scientific explanations of the working of the economy
Define normative economics
Dealing with prescriptions or recommendations based on personal value judgements ( a statement of opinion or belief )
Define factors of production
The resources used by firms in the production process. They are the inputs to the production process.
Define land
Natural resources, owners of land receive rent for their services
Define labour
The workforce of the economy, physical and mental effort expended by humans, owners of labour often receive a wage or salary for their services
Define capital
Man made resources not wanted for their own sake but for what they contributed to output, owners of capital receive interest for their services.
Define enterprise
The decision-making and risk-taking factor - how all the other factors are brought together, the reward they receive for their services is often profit.
Define factor rewards
The income earned by the owners of the factors of production, for their use
Define consumer goods (durable)
Goods that can be used repeatedly and for a long time
Define consumer goods ( non-durable )
Single-use goods are goods that are used very soon after they’ve been purchased
Define capital goods
Purchased by business to be used in the production of other goods and services
Define commercial services
Services to industry such as banking and finance
Define direct services
Services to the public such as hairdressing, valeting, retail, dentist.
Define public services
Services provided by the state such as health, education, police and the emergency services
Define by-products
Unintended outputs of a production process
What are the 4 factors of production
Land
Labour
Capital
Enterprise
What are the 2 types of consumer goods
Durable goods and non durable goods
What is the difference between wants and needs
Needs are necessary to survival, wants are those things that we desire, but can do without
What are the 5 basic needs
Warmth, shelter, food, clothing and water
What are resources
We refer to them as the factors of production
What is an economy
A system that seeks to deal with the basic economic problem and allocate scarce resources
What are the 3 main types of economic systems
The market economy / capitalist economy
The centrally-planned economy / command economy
The mixed economy
What is the free market
Resources are allocated through the price mechanism without any government interference
What is the centrally-planned economy
All resources belong to the state, there is no freedom of ownership, all factors of production owned by the state
What is the mixed economy
A mix of the free market and centrally planned economy
Define opportunity cost
The satisfaction lost from the next best alternative forgone
What is a free good
A good that has no opportunity cost / doesn’t require a sacrifice
What are economic goods
Goods that have an opportunity cost
Define production possibility frontier (PPFs)
A diagram that illustrates the maximum amount of one good that can be produced given a certain amount of another good, when all resources are being fully and efficiently utilised.
What is the area inside the PPF
Attainable and undesirable
What is the area outside the PPF?
Desirable and unattainable
What is a point on the PPF
Attainable and desirable
Define specialisation
A situation where individuals or firms or regions or nations concentrate upon producing a small range goods and services
Define division of labour
Occurs when the production process of a good or a service is divided into a number on individual operations and each operation is the special task of one worker
How to work out labour productivity
Output per time period divided by number of employees per time period
What are the advantages of division of labour?
More efficient No times wasted moving jobs Saving time in training operatives Makes possible a much greater use of machinery Saving of skill
What are the disadvantages of specialisation?
Monotonous tasks
Loss of craftsmanship
Workers are trained to do only one task
Interdependence
What are the functions of money?
A medium of exchange
A store of value
A unit of account
A standard of deferred payment
What are the characteristics of money
Portable Acceptable Durable Divisible Limited Extremely difficult to forge/copy Recognisable
