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32 Cards in this Set
- Front
- Back
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What is microeconomics |
The study of how individual firms, industries, workers and consumers make decision within an economy and how these decisions affect price and output of particular goods and services within the economy. |
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What is a positive statement? |
A statement capable of being verified or refuted by resorting to facts or further investigation. |
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What is a normative statement? |
A statement containing a value judgement which cannot be verified by resort to further investigation or research. |
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Which is better, positive or normative? |
Positive. |
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What is the economic problem? |
Infinite wants and finite resources result in scarcity. Therefore economics agents have to make choices. Any economic choice involves an opportunity cost. |
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What is an economic (or scarce) good? |
A good which limited resources have been used up in making. Most goods are economic goods. |
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What is a free good? |
Goods which do not require scarce resources to make. |
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Give 2 examples of free goods. |
Air, sunlight. |
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Is the NHS a free good? |
No. The NHS is 'free at the point of use' but scarce resources have been used up in producing it, so it is an economic good. |
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What are the 4 types of finite resources? |
Land, labour capital and enterprise. |
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What is the difference between needs and wants? |
Consumers have limited needs, which must be met for survival, and unlimited wants. |
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What 3 questions must economic agents answer? |
What to produce? How to produce it? How to allocate the produced goods and services? |
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What is land? |
All natural resources that can be used to produce goods. |
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What is labour? |
All human effort, physical and mental, used in the production of goods and services. |
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What is capital? |
Man-made goods used to produce other goods and services. Capital goods (or producer goods) are distinct from consumer goods. |
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Are shares capital? |
No. In economics, capital is physical assets not shares, bank accounts, etc. |
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What is investment? |
The purchase or acquisition of capital. |
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What are durable goods? |
Goods not used up in the act of consumption. |
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What is enterprise? |
Entrepreneurs taking risks and organising the other economic resources. |
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Can a person or thing be part of multiple factors of production? |
Yes. A worker (e.g. a CEO) can be part of both labour and enterprise. Similarly shareholders who provide financial capital are part of both capital and enterprise. |
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What factor of production is a bar of gold? |
Capital, as it is manufactured. |
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Draw a diagram of the factors of production. |
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What is national income? |
The sum of all incomes or factor payments in an economy. |
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Income from land is... |
Rent |
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Income from labour is... |
Wages |
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Income from capital is... |
Interest |
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Income from enterprise is... |
Profit. |
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What are the names of the 3 decisions that must be made to resolve the economic problem? |
•The consumption decision - What goods and services an economy should produce. • The production decision - How goods and services should be produced. •The distribution decision - Who should get the goods and services that the economy has produced. |
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What is opportunity cost? |
The next best alternative forgone when an economics decision is made. |
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What do economists have to assume about consumers? |
Economists have to assume consumers act rationally, and spend their scarce resources in a way that will give them maximum satisfaction (utility). |
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What are non-durable goods? |
Non-durables are consumer goods used up in the act of consumption. |
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Consumers are considered to be... |
Utility maximisers. |
