1.1 Nature of Economics

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Social Science
The study of people and their decisions.
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Utility
The satisfaction you gain from the consumption of a good or service.
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The difference between wants and needs
A need is something you can't live without whilst a want is a unnecessary desire.
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Basic Economic Problem
People's wants are unlimited but resources to satisfy these wants are limited.
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Opportunity Cost
The value of the next best alternative foregone.
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Free Good
A good that people can consume without reducing the amount available for others to consume.
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Positive Statements
Objective statements that can be tested, amended or rejected by referring to the available evidence.
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Normative Statements
Subjective statements that carry value judgements-not facts- based on the available evidence.
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What does a production possibilities frontier (PPF) illustrate?
The trade-offs facing an economy that produces only two goods.
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Money Functions
A medium of exchange; A measure of value; A store of value; A method of deferred payment.
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A measure of value
Can use money to put a value on something.
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A medium of exchange
Allows people to buy and sell goods.
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A store of value
Keep money and only spend it when you need it.
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A method of deferred payment
Money is of consistent value.
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Economic Agents
Consumers, Government, Firms, Workers.
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Division of Labour
Dividing the production process into different stages enables workers to focus on specific tasks.
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Advantages of division of labour
More efficient; Workers don't get in each other's way; Output increased.
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Disadvantages of division of labour
Staff could get bored; High labour turnover; Difficult to motivate.
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Other cards in this set

Card 2

Front

The satisfaction you gain from the consumption of a good or service.

Back

Utility

Card 3

Front

A need is something you can't live without whilst a want is a unnecessary desire.

Back

Preview of the back of card 3

Card 4

Front

People's wants are unlimited but resources to satisfy these wants are limited.

Back

Preview of the back of card 4

Card 5

Front

The value of the next best alternative foregone.

Back

Preview of the back of card 5
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