Topic 1 Flashcards
Economics Definition
Social science which studies society and the economic behavior and relationships between individuals and groups.
Basic Economic Problem Definition
Study of how scarce resources are used to satisfy needs and wants.
Capital Definition
Money, machinery, equipment and tools owned and used by a business.
Entrepreneurship/Enterprise Definition
Taking risks, being creative, innovative and use your initiative.
Land Definition
All earth’s natural resources.
Labour Definition
All potential workforce and their ability and effort.
Scarcity Definition
Choices have to be made about how scarce resources are allocated between different users.
Oppurtunity Cost Definition
Cost of giving up the next best alternative when a decision is made.
Economic Good Definition
Goods that are scarce and therefore involve oppurtunity cost.
Free Good Definition
Goods which have no oppurtunity cost such as air, sunshine and sea water.
Production Definition
A process that converts inputs into output of goods.
Capital Good Definition
A good which is used in the production of other goods or services, also known as a producer good.
Consumer Good Definition
A good which is consumed by individuals or households to satisfy their needs or wants.
Factors of Production Definition
Inputs into the production process, such as land, labour, capital and enterprise.
Need Definition
Something necessary for human survival.
Want Definition
Something people would like to have but is not essential for survival.
Production Possibility Frontier(PPF)
A curve showing the various combinations of 2 products that can be produced when all the available resources are fully and efficiently employed
Causes of an inward shift of PPF
Effects of natural disaster, economic damage caused by war, large scale net migration out of a country or a fall in productivity of labour resources.
Causes of an outward shift of PPF
Improvements in productivity and efficiency, more factors of production available, better management of existing resources, excessive resource extraction, discovery of new natural resource or innovation and technology improves output.
Resource Allocation Definition
The process through which the available factors of production are assigned to produce different goods and services.
Positive Statement Definition
A statement of fact that can be scientifically tested to see if it is correct or not.
Normative Statement Definition
A statement that includes a value judgement or view and cannot be scientifically tested.
Economic Welfare Definition
The economic well being of an individual, group within society or an economy.
Production Efficiency Definition
This occurs for the economy as a whole when it is impossible to produce more of one good without producing less of another.
Allocative Efficiency Definition
Occurs when the available economic resources are used to produce the combination of goods and services that best matched people’s tastes and preferences.
Market Economy Definition
Where goods and services are purchased through the price mechanism in a system of markets.
Planned(or command) Economy Definition
Where economic resources are allocated by government officials and planners to firms and other productive enterprises.
Mixed Economy Definition
Contains both a large sector and a large non-market sector in which the planning mechanism operates.
Pure Market Economy Definition
Where the price mechanism performs the central economic task of allocating scarce resources among competing uses through the markets which make up the economy.
Complete Command Economy Definition
An economy in which all decisions about what, how, how much, when, where and for whom to produce are taken by a central planning authority to all households and producers in the society.
