The economic problem

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Goods and services
Goods are tangible products that we can touch e.g. CDs or a car; services are intangible e.g. a holiday, restaurants
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Economic welfare
the benefit or satisfaction an individual or society gets from the allocation of resources
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Opportunity cost
the next best alternative forgone when an economic decision is made
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Economic goods
goods that are scarce so have an opportunity cost e.g. oil
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Free goods
goods that have no opportunity cost e.g. 'clean' air
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Factor market
the market for the factors of production that make other goods and services e.g. labour or raw materials
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Renewable resources
resources that can be replenished over time e.g. fish stocks and forests
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Profit
when the total income or revenue for a firm is greater than total costs
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Free market economy
one which has very little or no government involvement in providing goods and services. Its main role is to ensure that the rules of the market are fair e.g. no stealing
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Production possibility boundary
Indicates the maximum possible output that can be achieved given a fixed set of resources and technology in a particular time period
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Productive efficiency
When a firm operates at minimum average total cost, producing maximum possible output from inputs into the production process
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Allocative efficiency
When it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without producing less of another
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Productivity
a measure of efficiency: measuring the ratio of inputs to outputs e.g labour productivity is the output per worker
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Human capital
the Skills, Knowledge, Ability and Motivation (SKAM) of labour. Improvements here raise productivity and can shift the PPB to the right.
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Division of labour
Breaking the production process down into a sequence of tasks, with workers assigned to particular tasks
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Specialisation
the production of a limited range of goods by an individual factor of production or firm or country, in cooperation with others so that together a complete range of goods is produced
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Value judgements
Statements or opinions expressed that are not testable or cannot be verified and depend very much on the views of the individual and the values they hold
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Normative statements
Opinions that require value judgements to be made
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Positive statements
Statements that can be tested against real world data
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Other cards in this set

Card 2

Front

the benefit or satisfaction an individual or society gets from the allocation of resources

Back

Economic welfare

Card 3

Front

the next best alternative forgone when an economic decision is made

Back

Preview of the back of card 3

Card 4

Front

goods that are scarce so have an opportunity cost e.g. oil

Back

Preview of the back of card 4

Card 5

Front

goods that have no opportunity cost e.g. 'clean' air

Back

Preview of the back of card 5
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