Key words and phrases for chapter 1 economics.

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  • Created by: Nathan890
  • Created on: 28-10-16 14:48

Normative statements

Normative statements- 

These are statements that can not be scientifically tested.

For eample: If pensions are cut this winter more pensioers will die from pneumonia 

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Positive statements

Positive statements

These are statements that can be scientifically tested. If it is incorrect it is falsified.

for example: An increase in minimum wage increases unemployment among teenagers.

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Needs and wants

Needs and wants

Needs- This is something a person must have and there is no alternaive. For example people need water to survive

Want- this is something someone feels that they need this item, but it is not a necessity.

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Economic welfare

Economic welfare

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

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Capital goods and consumer goods

Capital goods and consumer goods

Capital goods-   a good which is used to make another good or servive. Also know as a producer good. for example, buildings and machinery

 

Consumer good-  this is something that is consumed by a household or individual to fulfill people's needs and wants. For example, milk 

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Finite and Renewable resources

Finite and Renewable resources

Finite resources- these are normally known as non-renewable resources and can run out.

Renewable resources- these are resources that can be renewed if carefully managed.

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The fundamental economic problem-

The fundamental economic problem-

Is how best to make decisions about the allocations of scarce resources among competing uses so as to improve ad maximise human happiness and welfare.

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Scarcity

Scarcity

Scarcity- this happens, because people want too much of specific resources and there isn’t enough of those specific resources to meet these wants.

A need for choice happens when someone has to choose between two or more alternatives.

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Opportunity costs

Opportunity costs

This is the cost of any decision in terms of what is lost.

OR

The cost of the next forgone alternative.

Rational behaviour is when people are trying to improve their self interest, or maximise their own benefit.

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Production possibility curves/ frontier curves

Production possibility curves (also known as frontier)-  is a curve that depicts combinations of two products, that can be made when all the resources that are available are effectively used.

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Economic growth

Economic growth is defined as the increase in the potential level of real output the economy can produce over a period of 

Short-run economic growth makes use of extra capacity that is available, and takes up the slack of an economy.

However long-term economic growth increases the capacity of production.

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Productive efficiency

Productive efficiency, occurs when it is impossible to produce more of one good without producing less of another good. It occurs within a firm when the total cost of production cost are minimised.

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Allocative efficiency

This occurs when the available resources are used to produce the combination of goods and services that best matches people’s tastes and preferences.

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