THEME 1.1 Flashcards
Economics
The allocation of scarce resources to provide for unlimited human wants
Ceteris paribus
‘All other things being equal’
Positive economic statement
Based on facts which can be tested as true or false and are value-free
Normative economics statement
Based on value judgements which cannot be tested as true or false
Scarcity
There are finite resources compared to infinite human wants, so choices have to be made about how to use those resources
Opportunity costs
The value of the next best alternative forgone
Renewable resource
A resource whose stock level can be replenished naturally over a period of time
Non-renewable resource
A resource whose stock level decreases over time as it is consumed
Consumer good
A good, such as a chocolate bar, that directly provides utility to consumers. It is wanted for the satisfaction it gives.
Capital goods
A good that is used to produce consumer goods or services, such as a machine that helps make chocolate bars. It is wanted not for its own sake, but rather for the consumer goods and services it can produce
Production Possibility Frontier / curve
PPF
The maximum potential output of a combination of goods an economy can achieve when all its resources are fully and efficiently employed, given the current level of technology.
Specialisation
When an individual, firm, region or country concentrates in the production of a limited range of goods and services
Division of labour
The specialisation of workers on individual tasks in the production process to increase efficiency
Money
Anything that is generally acceptable in the payment of goods or services, or of a debt
Free market economy
Where all resources are privately owned and allocated via the price mechanism. There is minimal government intervention.
