Microeconomics 1

Front 1

Positive statement

Back 1

positive statement a statement of fact that can be scientifically tested to see if it is correct or incorrect.

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Normative statement

Back 2

normative statement a statement that includes a value judgement and cannot be refuted just by looking at the evidence.

Front 3

Need

Back 3

need something that is necessary for human survival, such as food, clothing, warmth or shelter.

Front 4

Economic Welfare

Back 4

economic welfare is the economic well-being of an individual, a group within society, or an economy.

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Economic System

Back 5

economic system the set of institutions within which a community decides what, how and for whom to produce.

Front 6

Value Judgement

Back 6

A value judgment is about whether something is desirable or not.

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What judgments do government ministers make when deciding on economic policies?

Back 7

Government ministers make value-based judgments when deciding on economic policies.

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No matter what policy decisions governments make -

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There will always be winners who gain and losers who suffer as a result of government policy decisions.

Front 9

Relation between command, market, and mixed economy

Back 9

Front 10

Economic System

Back 10

is the set of institutions within which a community decides what, how, and for whom to produce.

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Market Economy

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is an economy in which goods and services are purchased through the price mechanism in a system of markets.

Front 12

Command or Planned Economy

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is an economy in which government officials or planners allocate economic resources to firms and other productive enterprises.

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Mixed Economy

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is an economy that contains both a large market sector and a large non-market sector in which the planning mechanism operates.

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Economic systems can also be defined in terms of -

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who owns the means of production

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factors of production are -

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inputs into the production process, such as land, labour, capital and enterprise.

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What does Production do?

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production converts inputs or factor services into outputs of goods and services.

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Capital good /producer good

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A good which is used in the production of other goods or services.

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consumer good is -

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a good which is consumed by individuals or households to satisfy their needs or wants.

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renewable resource

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a resource, such as timber, that with careful management can be renewed as it is used.

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Non-Renewable or Finite Resource

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a resource, such as oil, which is scarce and runs out as it is used.

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Environmental resources

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Environmental resources comprise all the natural resources that are used or can be used in the economic system.

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Inputs

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Inputs are called factors of production and are economic resources. Inputs are also used to produce the capital goods that are necessary for the eventual production of consumer goods and services.

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Entrepreneurial Profit

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Entrepreneurial profit is the profit left over after the cost of employing the other factors of production is deducted from the sales revenue gained from selling the goods and services the entrepreneur decides to produce.

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Environmental Resources

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Environmental resources comprise all the natural resources that are used or can be used in the economic system

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Technical progress

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New and better ways of making goods and new techniques for producing more output from scarce resources

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economic growth

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the increase in the potential level of real output the economy can produce over a period of time.

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full employment

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when all who are able and willing to work are employed

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unemployment

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when not all of those who are able and willing to work are employed.