The Economic Problem Flashcards
What are positive statements?
Are objective statements that can be tested by referring to evidence
What are normative statements?
Are subjective statements which contain a value judgement.
What is the economic problem?
Everyone has infinite wants but there are a limited amount of resources to satisfy these wants as resources are scarce and this leads to economic problem.
What are the 4 factors of production?
CELL
- Capital
- Enterprise
- Land
- Labour
Describe Capital from FoP.
Equipment used in producing goods + services (machinery).
Describe Enterprise from FoP.
It’s the willingness to take risk to make a profit.
Describe Land from FoP.
Natural resources like: - non renewable resources (Gas, oil, coal) - renewable (Wind, tidal power, wood) - water - animals - materials (gold, diamond)
What’s the economic activity?
Involved combining the factors of production to create outputs people can consume.
Who are the 3 economic agents?
Producers - firms/ people that make goods or provide services
Consumers - people/ firms who buy goods and services
Govt - a govt who sets rules and other people have to follow
What is the PPF?
describe
Shows the maximum possible production of 2 goods/services with given factors of production.
In the PPF, what do points ON the curve show?
They are productively efficient, they use up all factors of production to maximum level.
In the PPF, what do the points INSIDE the curve show?
It is productively inefficient, it wastes factors of production and doesn’t use to the maximum level.
In the PPF, what do the point OUTSIDE the curve show?
The point is unattainable with given FoP - cant produce beyond the curve yet with Fop.
What is a trade-off?
When you have to choose between conflicting objectives because you can’t achieve all your objectives at the same time. It involves compromising and aiming to achieve each of your objectives a bit.
What is a opportunity cost?
It is a decision of the next best alternative that you give up in making that decision.
