Introductory Concepts

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Ceteris Paribus

In order to make predictions in Economics, we


often make the assumption ceteris paribus


which means all other things remain constant.

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Production

Is concerned with the


making of goods.

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Consumption

Is the using up of goods


and services.

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Exchange

Is the swapping of goods/service and/or 


money for each other.

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Consumer goods

Are good that are wanted directly

by consumers, they are the end result of

production and manufacturing and are what a

consumer will see on the store shelf. 

Clothing, food, automobiles and jewelry are

all examples of consumer goods. 

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Consumer durables

Are goods that are wanted directly by


consumers and will be used up over a long


period of time

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Capital goods

Are goods that are made


for use by producers.

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Factors of Production

Is the name given to the inputs used in the


production process.

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Labour

Is the input that


provides the workforce.

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Capital

Inputs which are man


made, eg. machinery.

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Land

Is the inputs which include all


natural resources.

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Entrepeneur

Is the organiser of the other inputs, they


make all the decisions concerning production


and bear all the risk.

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Scarcity

The basic economic


problem.

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Utility

When a consumer makes a choice, he will


choose the goods which give him maximum


utility or satisfaction.

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Opportunity Cost

The cost of the next best alternative


foregone.


Or the cost of the next best alternative one

gives up to consume the good

one chooses.

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