1.The foundations of economics
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27 terms
Terms | Definitions |
|---|---|
 microeconomics | the study of the behavior of individual consumers, firms, and industries and the determination of market prices and quantities of good, services, and the factors of production. |
| macroeconomics | the study of aggregate economic activity. It investigates how the economy as a whole works. |
| ceteris paribus | all other things being held equal. |
| positive economics | matters if economics that can be proven to be right or wrong by looking at the facts. |
| normative economics | matters of economics that are based upon opinion and so are incapable of being proved to be right or wrong. |
| scarcity | the limited availability of economic resources relative to society's unlimited demand for goods and services. |
| land | the physical factor of production. it consists of natural resources, some of which are renewable and some of which are non-renewable. |
| labour | the human factor of production. it is the physical and mental contribution of the existing work force to production. |
| capital | the factor of production that comes from investment in physical capital and human capital. |
| physical capital | the stock of manufactured resources. |
| human capital | the value of the workforce |
| entrepreneurship | the factor of production involving organising and risk-taking. |
| opportunity cost | it is the next best alternative forgone when an economic decision is made. |
| free good | goods or services which are unlimited in supply and have no opportunity cost are free goods. a free food has an unlimited supply ad market price zero. |
| economic good | a good or services which is relatively scarce and so has a price. an opportunity cost is involved if it is consumed. |
| utility | the satisfaction of pleasure that an individual derives from the consumption of a good or service. |
| production possible curve | it shows the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed. |
| actual output | the actual production of goods and services in an economy in a given time period. |
| actual growth | this occurs when previously unemployed factors of production are brought in to use. it is represented by a movement from a point within a PPC to a new point nearer to the PPC. |
| potential output | the possible production that would be possible in an economy if all available factors were being employed. |
| potential growth | this occurs when the quantity and/or quality of factors of production within an economy is increased. it is represented by an outward shift of the PPC. |
| economic growth | the growth of real output in an economy over time. usually measured as growth in real GDP. |
| economic development | it is a broad concept involving improvement i standards of living, reduction in poverty, improved health and education. |
| sustainable development | development that meets the needs of the present without compromising the ability of future generations to meet their own needs. |
| free market economy | an economy where the means of production are privately held by individuals and firms, demand and supply determine how much to produce, how/how many to produce, and for whom to produce. |
| planned economy | an economy where the means of production are collectively owned. the state determines how much to produce, how/how many to produce, and for whom to produce. |
| transition economy | an economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system. |
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