Topic 1 Key Concepts and Terminology Flashcards
What is scarcity?
The fundamental economic problem of having unlimited wants and needs but limited resources to satisfy them.
What does choice refer to in economics?
The act of selecting one option over others due to scarcity. Every choice involves a trade-off.
Define opportunity cost.
The value of the next best alternative forgone when making a choice.
What are economic resources?
Inputs used to produce goods and services, categorised as Land, Labour, Capital, and Entrepreneurial Ability.
What is land in the context of economic resources?
Natural resources used in production (e.g., raw materials, land itself). Income derived from land is rent.
What does labour refer to in economics?
The human effort (physical and mental) used in production. Income derived from labour is wages.
What is capital in economic terms?
Goods produced for use in further production (e.g., machinery, tools, buildings). Income derived from capital is interest.
Define entrepreneurial ability.
The skill and initiative to combine land, labour, and capital to produce goods and services and take risks.
What does the Production Possibility Curve (PPC) represent?
A graphical representation showing the maximum possible combinations of two goods or services that can be produced in an economy.
What is efficiency in economic terms?
Using resources in a way that maximises output with minimal waste.
Define productive efficiency.
Producing goods and services at the lowest possible cost.
What is allocative efficiency?
Allocating resources to produce the combination of goods and services that society most desires.
What is productivity?
The output produced per unit of input (e.g., output per worker-hour).
What does economic growth indicate?
An increase in the economy’s ability to produce goods and services over time.
What is unemployment?
A situation where people who are willing and able to work are unable to find jobs.
Define trade-offs.
The act of giving up one thing to gain another, inherent in decision-making under scarcity.
What does underutilisation of resources mean?
A situation where an economy is producing below its potential.
What is the Ceteris Paribus Assumption?
A Latin phrase meaning ‘all other things being equal.’
Define economic models.
Simplified representations of reality used to understand and explain complex economic relationships.
What is relative scarcity?
The idea that while some resources may be abundant, they are still finite relative to unlimited wants and needs.
What does equity refer to in an economy?
Fairness in the distribution of resources and outcomes.
