1.1 Nature of Economics

Specification point 1.1

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1.1.1 What does ceteris parabus mean?
All other things remaining equal
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1.1.2 What is a positive statement?
Objective statements that can be tested - Facts
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1.1.2 What is a normative statement?
Subjective statements which contain a valued judgement and can't be tested - Opinions
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1.1.3 What is the problem of scarcity/basic economic problem?
People have finite needs but infinite wants. Resources are finite so choices have to be made. Economies decide ; what to produce, how to make the best use of the scarce resources, and whom to produce it for.
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1.1.3 What is a renewable resource?
A resource that can be replenished. Rate of use < Rate of replenishment.
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1.1.3 What is a non-renewable resource?
A resource that cannot be readily replaced. Rate of use > Rate of replenishment
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1.1.3 What is an opportunity cost and its importance to economic agents?
The value of the next best alternative forgone. Consumers - aim to satisfy utility. Producers aim to maximise profits. Governments seek to maximise social welfare.
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1.1.3 What are the four factors of production?
Land, Labour, Capital and Enterprise
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1.1.4 What is a PPF?
Maximum combination of capital and consumer goods a economy can produce with a given level of resources and a given state of technology.
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1.1.4 What is a consumer good?
Goods that are demanded and bought by households/individuals.
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1.1.4 What is a capital good?
Goods that are produced in order to aid the production of consumer goods in the future.
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1.1.5 What is specialisation?
The production of a limited range of goods by a company/individual/country.
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1.1.5 What is the division of labour?
When labour becomes specialised in a particular part of the production process.
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1.1.5 What are the functions of money?
Medium of exchange, measure of value, method of deferred payment, store of value.
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1.1.6 What is a free market (Adam Smith/Friedrich Hayek)?
A market where individuals are free to make their own choices and own factors of production without government interference. Resources are allocated through the price mechanism.
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1.1.6 What is a mixed economy?
When both the free market mechanism and the government planning process allocate a significant amount of the total resources in the country.
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1.1.6 What is a command economy (Karl Marx)?
An economy where all factors of production, except labour, is owned by the state and labour is directed by the state.
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Card 2

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1.1.2 What is a positive statement?

Back

Objective statements that can be tested - Facts

Card 3

Front

1.1.2 What is a normative statement?

Back

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Card 4

Front

1.1.3 What is the problem of scarcity/basic economic problem?

Back

Preview of the front of card 4

Card 5

Front

1.1.3 What is a renewable resource?

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