Unit 1 Vocab Flashcards
Factors of production
anything that is useful in the production of goods (land, labor, capital)
Production
the process of creating goods and services in an economy
Investment
the creation of capital goods
Liabilities
debt obligations
Resources
inputs available for the production of goods and services
Wants
needs that are not always realised
Scarcity
a situation in which wants and needs are in excess of the resources available
Fundamental Economic Problem
scarce resources relative to unlimited wants
Land
Natural resources used in production
Labor
Human Resources used in production
Capital
man-made aid in production
Entrepreneur
organizes production and is willing to take risks
Consumption
process by which consumers satisfy their wants
Positive Statement
one that is based on empirical or actual evidence
Normative Statement
one that is subjective about what should happen
Specialization
the process by which individuals, firms and economies concentrate on producing those goods and services where they have an advantage over others
Planned Economy
one where resources allocation decisions are taken by a central body
Liquidity
the extent to which there is an adequate supply of assets that can be turned into cash
Opportunity cost
The cost expressed in terms of the best alternative that is forgone
Short run
time period when a firm can only change some and not all factor inputs
Long run
time period when all factors of production variables
Very long run
time period when all key inputs into productions are variables
Market
where the buyers and sellers get together to trade
Division of Labor
Where a manufacturing process is split into a sequence of individual tasks
Economic structure
the way in which an economy is organised in terms of sectors
Economic System
the means by which choices are made in an economy
Market (Free) Economy
one where most decisions are taken through market forces (individually owned)
Mixed Economy
one where market forces and government, private and public sectors are involved in resource allocation decisions
Market Mechanism
where decisions on price and quantity are made on the basis of demand and supply alone
Production Possibility Curve
a simple representation of the maximum level of output that an economy can achieve when using its existing resources
Reallocation of resources
where resources are deliberately moved from one product to another
Factor Mobility
the ease by which factors of production can be moved around
Economic Growth
represented by a shift outwards of the production possibility curve
Capital Consumption
The capital required to replace that which is worn out
Developing Economy
one that has a low income per head
Money
Any item that is generally acceptable to sellers in exchange for goods and services
Near Money
non-cash assets that can be quickly turned into cash
Choice
underpins the concepts that resources that resources are scare so choices have to be made by consumers, firms and governments
