AS Economics-The Economic Problem

Factor Inputs/Factors of Production: 

- Land

 - Capital-The Investment the firm or market does

 - Entrepeneurship/Enterprise

 - Labour-The human input

Positive and Normative Questions

-Positive-Questions which can be proved or disproved using facts, research or investigation. Usually use words like `can` and `effective` or `is`

-Normative-Cannot be proved using research or investigation.  Usually involve words like `should` or `ought`

Opportunity Cost-The cost expressed in terms of the next best alternative sacrificed.  This is important as it helps us view the true cost of decision-making and implies valuing different choices

Objectives or Consumers and Producers:

Consumers-To simplify analysis, economics assumes that consumers are rational decision makers and act in a way that maximizes their satisfaction(utility).  This means that consumers use their limited income to buy that combination of goods and services that yield the highest possible level of satisfaction(utility)

Producers-Economics assumers that produces are rational decision makers and act in a way that maximizes their welfare.  This means producers use their limited resources to produce goods or services that yield the highest possible level of profits.  In reality many businesses pursue objectives different from pure profit maximisation