Unit 1 Definitions Flashcards
Demand
The quantity of a good or service that consumers are willing and able to buy at given prices in a given period of time.
Supply
The quantity of a good firms are prepared to sell in a market at given prices in a given period of time
Macroeconomics
Examines the economy as a whole
Microeconomics
Examines individual consumers, firms and markets in an economy
Normative statement
An opinion that cannot be scientifically be tested
Positive statement
A statement that can be scientifically tested and possibly falsified
The economic problem
Limited amount of resources to the unlimited quantity of goods and services that people desire
Production possibility diagram
Shows different possible combinations of goods that can be produced using available resources
Consumer good
Eg food or an ipod, is used by consumers to meet their needs or wantd
Capital good
Eg machine, is used to produce other goods, including consumer goods
Technical progress
Improved methods of producing existing goods and enables completely new types of good to be produced
Opportunity cost
The cost of the next best alternative sacrificed
Finite resource
A resource eg oil which is scarce and runs out as it is used
Free good
Eg air- no costs of production and no scarcity
Renewable resource
Eg timber- that with careful management can be renewed as it is used
Production
A process, or set of processes, that converts inputs into outputs
Factors of production
Inputs into the production process, such as land, labour, capital and enterprise
Command economy
The planning mechanism allocates resources between competing uses
Market economy
Markets and prices allocate resources between competing uses
Market
A place where buyers and sellers meet