Unit 1 AOS 1 - Introduction Flashcards
Microeconomics
The operation of smaller parts that make up the larger economy
Macroeconomics
The broader picture that combines all markets and industries and the overall state of the country’s/ world’s economy
Positive Economics
Fact based economic statements that can be verified or tested using evidence
Normative Economics
Statements or claims based on opinions that cannot be determined to be true/false
Resources
The inputs used by businesses to produce or supply goods/services - natural, labour (+enterprise) and capital resources
Relative Scarcity
The imbalance that exists between unlimited wants for goods and services relative to the limited resources that are available to satisfy these wants
3 Basic Economic Questions
- What and how much to produce?
- How to produce?
- For whom to produce?
Trade Off
The item that you gave up as a result of the choice made due to relative scarcity
Opportunity Cost
The actual value of the item given up/best alternative forgone when making choices
How does the problem of relative scarcity affect individuals?
Individuals have limited resources and incomes, but unlimited needs and wants, hence, they have to make choices when consuming goods, causing an opportunity cost to arise.
How does the problem of relative scarcity affect businesses?
Businesses have limited natural, labour and capital resources available. They need to make economic decisions to ensure the opportunity cost is at its minimum, and there is maximum benefit for the business.
How does the problem of relative scarcity affect the government?
The government has limited natural, labour and capital resources available. They need to make economic decisions to ensure the opportunity cost is at its minimum, and there is maximum benefit for most people.
