Theme 1.1 Flashcards
What is Behavioural Economics
Using elements of psychology to better understand decision-making by investors and consumers
What is Ceteris Paribus
The assumptions that all other factors remain constant
What is an Economic Model
A simplified representation of economic processes.
What is Microeconomics
The study of economics at the level of the individual firm, industry or consumer
What is a Normative Statement
An opinion of what ought to be. They are subjective and carry value judgements
What is a Positive Statement
A statement that can be tested to see if it’s incorrect.
What happens if a Positive Statement is proven incorrect
It is falsified
What is a Value Judgment
A view of the rightness or wrongness of something
What is the Economic Problem
We have unlimited wants but limited resources
What is Barter
The practice of exchanging one good or service for another without using money
What is a Capital Good
Physical assets or resources that are used in the production of goods and services
What is an Economic Agent
A participant in an economic system (a consumer, business or government)
What is an Entrepreneur
An individual who takes a financial risk in order to make a profit
What are Factor Incomes
The rewards to the factors of production
What is the Factor Incomes of the Factors of production
Land - Rent
Labour - Wages
Capital - Interest
Enterprise - Profit
What are the Factors of Production
Land
Labour
Capital
Enterprise
What are Free Goods
Goods which don’t use up any factor inputs when supplied. They have no opportunity costs.
Factors of Production
LAND
Natural resources available for production
Factors of Production
LABOUR
The human input into the production process
Factors of Production
CAPITAL
Goods used in the supply of other products
Factors of Production
ENTERPRISE
Entrepreneurs organise factors of production and bring products to the market
What are Inputs
Resources used in the production of goods and services
What is Interest
The reward to of having capital
What are Needs
An essential for survival (food, water, shelter )
What are Wants
Something desirable but not essential (designer clothes, expensive meals out, sports car)
What are Non-Renewable Resources
Resources which are finite
What are Renewable Resources
Resources that are replaceable if the rate of extraction is less than the natural rate
Examples of Non-Renewable Resources
- Fossil Fules
- Minerals
Examples of Renewable Resources
- Solar Energy
- Oxygen
- Trees
What is Scarcity
A limited amount of resources available to produce goods and services.
What is Allocative Efficiency
Where resources are distributed in a way that maximises overall social welfare
What are consumer goods
Goods bought and used by consumers and households.
What is Economic Efficiency
Making the best/optimum use of our scarce resources so economic and social welfare is maximised over time.
What is an Opportunity Cost
The cost if giving up the next best alternative
What is a Production Possibility Frontier (PPF)
Shows the maximum possible output combinations of two goods and services an economy can achieve (when all resources are full employed)
What is Economic Growth
An increase in the productive potential of a country
How is Economic Growth shown on a PPF
An outward shift
What is Productive Potential
The amount of output an economy could produce if all its resources were fully and efficiently employed
What is a Trade-Off
The process of choosing between two or more alternative courses of action
