Theme 1 Flashcards
definitions
What do positive statements describe?
The world as it is, without making any value judgments.
On what are positive statements based?
Objective facts.
Can positive statements be proven or disproven?
Yes.
opportunity costs
next best alternative given up.
basic economic problem
limited supply and unlimited demand
law of diminishing returns
the output of consumer goods diminishes as more resources are spent on FOP
what shifts PPF out
^quantity of factors of production
^better management
advance in technology
what shifts PPF in
natural disasters, war or conflict
workers lose motivation after long hours
factor mobility
how easily production can be shifted to producing another good
geographical mobility
how easily resources can be moved between locations
four functions of money and their meanings
medium of exchange: transaction between buyer and seller
store of value: can hold value over time
unit of account: can be used to value goods or services
specialization
when individuals, firms, or a nation focuses their resources on producing a limited range of goods
division of labour
where tasks needed to produce an item are divided among workers
pros of specialisation and division of labour
economies of scale
lower costs
increase productivity
cons of specialisation and division of labour
find work repetitive
dependancy
structural unemployment
lack of variety
explain the three types of economies + pros and cons
free: no government intervention
- price mechanism (auto set prices)
-inequality/monopoly
mixed: some government intervention
planned economy: government has full control over the economy
