Economics Theme 1

Front 1

Economic Problem

Back 1

Resources are limited but wants are infinite. This means that choices must be made.

Front 2

Opportunity Cost

Back 2

The value of the next best alternative forgone when resources are put to a certain use.

Front 3

4 different resources

Back 3

Land, Labour, Capital and Enterprise

Front 4

Land

Back 4

Anything that we can get from land

Front 5

Labour

Back 5

Workers, education is quality and population is quantity

Front 6

Capital

Back 6

Anything that helps labour and land produce goods and services

Front 7

PPF (Production Possibility Frontier)

Back 7

Shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed

Front 8

Convex PPF

Back 8

Increase in opportunity cost

Front 9

"Law Of Increasing Costs"

Back 9

As you increase production of one good, the opportunity cost to produce an additional good will increase. This is because not all resources are the same so less desirable resources have to be employed when more of something is produced.

Front 10

The two ways in which resources can change.

Back 10

In either quality or quantity

Front 11

Consumer goods

Back 11

Designed to satisfy and provide pleasure to the consumer. Can be either durable or non durable.

Front 12

Economic good

Back 12

A good which has an opportunity cost - e.g a car

Front 13

Free good

Back 13

A good which doesn't have an opportunity cost - e.g air

Front 14

GDP (Gross Domestic Product)

Back 14

Value of all the goods and services in an econemy in a year

Front 15

Actual growth

Back 15

Economy's output of goods or services increase

Front 16

Potential Growth

Back 16

Increase in the productive capacity of the economy.

Front 17

Substinence

Back 17

Being completely self sufficient meaning that no trade takes place. This is because everything that you need, you make.

Front 18

Specialisation

Back 18

Only producing specific goods or services, due to this trade must take place.

Front 19

Double coincidence of wants

Back 19

When no trade can take place due to their requirements not matching. This problem can be solved through the use of a currency.

Front 20

Specialisation pros

Back 20

Quality and quantity of output increases due to workers becoming skilled.

Front 21

Specialisaion cons

Back 21

Person is unemployed if the skill is no longer required. Country can be effected such as Saudi Arabia with oil

Front 22

Market Economy

Back 22

Market in which market forces are allowed to allocate the resources

Front 23

Command Economy

Back 23

Allocation of resources are guided by state.

Front 24

Mixed Economy

Back 24

Allocation of resources are allocated partly through price signals and partly on the basis of intervention by the state.

Front 25

Adam Smith

Back 25

Pro free market, "invisible hand" would allocate resources in society's best interests. Selfishness benefits others by producing goods that people want and innovate for business.

Front 26

Karl Marx

Back 26

Pro Command market (communism), believed that the small ruling class of producers dominated working class. Concerned about inequality.

Front 27

Freidrich hayek

Back 27

Pro free market and anti command. Believed that government didn't have necessary knowledge to allocated resources in the most beneficial way for society.

Front 28

Positive Statement

Back 28

Completely factual

Front 29

Normative statement

Back 29

Subject to opinion

Front 30

Ceteris paribus

Back 30

Assumption that all other variables within the model remain constant whilst one change in being considered.

Front 31

Model

Back 31

A simplified representation of reality used to provide insight into economic decisions and events.