section 1 Flashcards
microeconomics focus
individual markets and behaviour of firms within markets
normative statements
statements based on a persons value judgements, cannot be proven
value judgements based on
moral values and political beliefs
positive statements
statements based on facts and can be proven
economic need
something needed to survive, non-negotiable
economic want
something people feel improves standards of living
economic welfare
the standard of living + peoples general wellbeing
economic activity
production of goods and services to satisfy needs and wants
pure command economy
100% public ownership (communism)
gov decides what/how/who gets goods/services produced
no competition to get needs = better welfare
pure free market economy
100% private ownership (pure capitalism)
firms decide what/how.who gets goods/services produced
introduces competition = more desirable products
3 key economic desicions
what to produce
how to produce it
who is to benefit from good/service
production
process of combining scarce resources into finished product
4 factors of production
capital
enterprise
land
labour
capital
equipment used in produced goods + services that can be sold to consumers. capital goods produce consumer goods
enterprise
skills and knowledge to combine factors of production into a firm
land
natural capital, anything from the land to produce goods
basic economic problem
economic recources are scarce compared with unlimited wants of society
labour
human capital, includes the number of work force + skills and knowledge of the work force
opportunity cost
the cost of forgoing (losing) the next best/different opportunity
economic goods create a _______ when consumed
opportunity cost
free good
has 0 opportunity cost
