A simplified representation of reality used to provide insight into economic decisions and events.
Model
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A set of arrangements that allows transactions to take place.
Market
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The study of economic decisions taken by economic agents, including households and firms.
Microeconomics
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The study of the interrelationships between economic variables at an aggregate level.
Macroeconomics
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A statement about what is i.e. about facts - must be able to be test and proved or disproved.
Positive Statement
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A statement involving a value judgement that is about what ought to be. Contains a value judgement. Usually contains "should". They are objective.
Normative Statement
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An expansion in the productive capacity in the economy.
Economic Growth
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A situation that arises because people have unlimited wants in the fact of limited resources.
Scarcity
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A good that is not scarce and therefore is available without limits. Available in as great a quantity as desired with zero opportunity cost to society. E.G. Earth's atmosphere.
Free good
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The basic economy problem
Infinite Wants. Finite Resources. Therefore choices need to be made on how resources are allocated.
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Choices
Individuals must choose which goods and services to consume. Governments have to make choices between alternative uses of resources.
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In decision making the value of the next best alternative.
Opportunity Cost
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Economic Agents
Three groups of decision makers: households, firms and government.
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Make choices about their expenditure. Take decisions about their supply of labour.
Economic Agents (Households)
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Make choices about what to produce. What techniques to use. The price in which they can sell (important in economic analysis)
Economic Agents (Firms)
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Fulfills several roles in society. Undertakes expenditure and influences the economy through taxation and regulation of markets.
Economic Agents (Government)
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Resources used in the production process; inputs into production. Labour, Capital, Entrepreneurship and Land.
Factors of Production
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Goods used to make more goods (produced resource) e.g. factories and machines.
Capital
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An entrepreneur is an individuals who combines all the factors of production to produce output. They have the ideas/vision.
Entrepreneurship
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People/workers/staff e.g. physical&mental work. Skilled and unskilled.
Labour
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Anything you can mine, fish, grow and extract e.g. minerals, food, oil, gold, gas and metal.
Land
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Rewards for services - Labour (and entrepreneurship)
Wages and Salaries
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Rewards for services - Captia
Profit
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Rewards for services - Land
Rent
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When an individual, organisation or country specialise in the production of a good or service. Countries specialise in a product, commodity or service due to finite resource, efficiency and trade.
Specialisation
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A process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages. It is specialisation on an individual level.
Division of Labour
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A curve showing the maximum combinations of goods and services that can be produced in a set period of time given available resources.
PPC (Production Possibility Curve)
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Functions of Money - Medium of Exchange
e.g. giving money for a sandwich; you are exchanging things.
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Functions of Money - Store of Value
It must be possible to use it for future transactions.
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Functions of Money - Unit of Account
Allows the value of goods/services/other assets to be compared. Prices of goods reflect the value that society places on them.
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Functions of Money - Standard of Deferred Payment
e.g. a firm may wish to hire a worker to be paid at the end of the month. Such contracts are typically agreed in terms of a money value. We can also borrow now and pay back later.
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Other cards in this set
Card 2
Front
Market
Back
A set of arrangements that allows transactions to take place.
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