Vocab Quiz 2 Flashcards
Economics
Economics is the study of how to make the best possible use of scarce or limited resources to satisfy unlimited human needs and wants.
Microeconomics
The study of the behaviour of individual consumers, firms, and markets and the determination of market prices and quantities of goods, services, and factors of production.
Macroeconomics
The study of aggregate economic activity. It investigates how the economy as a whole works.
Factors of production
Resources used in the production of goods and services; include land (natural resources), labour, capital and entrepreneurship.
Land
One of the four factors of production that refers to the natural resources with which an economy is endowed; also referred to as “gifts of nature”.
Labour
One of the four factors of production that refers to the physical and mental contribution of workers to the production process.
Capital
Physical capital refers to means of production that include machines, tools, equipment and factories; the term may also refer to the infrastructure of a country. Human capital refers to the education, training, skills and experience embodied in the labour force of a country.
Entrepreneur
Refers to the ability of certain individuals to organize the other factors of production (land, labour, capital) and their willingness to take risks.
Rent
he income for the services of a piece of land collected by its owner
Wages
Payment received by the factor of production labour, which is a certain amount per unit of time
Interest rate
The cost of borrowing money or the reward for saving money over a period of time expressed as a percentage.
Profit
The reward of entrepreneurship. They are defined as the difference between total revenues and total economic costs.
Resources
A service or other asset used to produce goods and services that meet human needs and wants
Scarcity
The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.
Opportunity cost
The next best alternative foregone when an economic decision is made.
Sustainability
Refers to the preserving the environment so that it can continue to satisfy needs and wants into the future.
Free goods
Goods such as air or sea water that are not considered scarce and thus do not have an opportunity cost.
Economic systems
Systems of production, resource allocation and distribution of goods and services within a society
Planned Economy
An economy where the means of production (land and capital) are owned by the state. The state determines what/how much to produce, how to produce, and for whom to produce.
Mixed economy
An economy that has elements of a planned economy and elements of a free market economy. In reality, all economies are mixed. What is different is the degree of the mix from country to country.
Production possibility curve
A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed.
Increasing Opportunity Cost
As you continue to increase production of one good, the opportunity cost of producing that next unit increases, resulting in a bow-shaped curve.
Constant opportunity cost
When the opportunity cost stays the same as you increase your production of one good, resulting in a linear PPC
Actual economic growth
Occurs when real output (real GDP) increases through time and is a result of greater or better use of existing resources.
Circular flow of income model
A simplified illustration that shows the flows of income and expenditures in an economy.
Leakages
Income not spent on domestic goods and services. It includes savings, taxes and import expenditure.
Injections
Within the circular flow model these refer to spending on domestic output that does not originate from households and thus includes investment spending by firms, government expenditures and exports.
Positive economics
Deals with areas of the subject that are capable of being falsified, or shown to be correct or not.
Normative economics
Deals with areas of the subject that are open to personal opinion and belief, thus not subject to refutation.
Refutation
A method used in the natural sciences and social sciences where any proposition must be subjected to an empirical test in order to see if it can be disproven or refuted. If it is disproven or refuted, then the proposition must be rejected.
