IB Economics Chapter 1

Terms in this set (33)

Finite
Limited
Infinite
Unlimited
Goods
Physical objects that are capable of being touched-tangible.
Services
Intangible products
Needs
Items people must have to survive
Wants
Items people would like but are not needed for immediate physical survival.
Scarcity
The result of an inability to satisfy all of everyone's wants.
Rationing system
Ways of allocating finite resources to fulfill infinite wants.
Allocate
Give or provide
Economics
A study of Rationing Systems and how scarce resources are allocated
Opportunity cost
The next best alternative foregone when an economic decision is made.
Economic goods
Goods and services that require scarce resources to be sacrificed in order for them to be produced.
Free goods
Goods that have zero opportunity costs of production
Factors of production
Resources that allow an economy to produce its output. (Land, labor, capital, management)
Land
Everything that is grown on the land or found under it. Everything that is found in and under the sea, includes all natural resources.
Labor
Physical and mental contribution of the existing workforce to production.
Capital
The investment in physical capital and human capital.
Physical capital
The collection of manufactured resources that is used to produce goods and services in the economy.
Human capital
The value of the workforce
Management and Entrepreneurship
The willingness and ability of certain individuals to organize the three other factors of productions and take risks.
Production Possibility Curves
Used to show concepts of scarcity, choice, opportunity cost, etc. Shows maximum combinations of goods and services that can be produced in a certain time.
Positive statement
A statement that can be proven right or wrong.
Normative statement
A matter of opinion and cannot be proven right or wrong.
5 Disadvantages of a Free Market
- Demerit goods (harmful) are over provided
- Merit goods (benefit) are under provided.
- Resources may be used up too quickly.
- Parts of society will not be able to look after themselves
- Firms may grow so large that they dominate industries.
4 Disadvantages of a Planned Economy
- Shortages and surpluses. Economic decision are too complicated to plan
- Resources will not be used efficiently.
- Gov't dominance
- Unpopular gov't plans implemented.
National Income
The value of all the goods and services produced in an economy in a given time period.
Problem with measuring Nat'l Income
Inflation
Inflation
The persistent increase in the average price level of an economy
"Real" Nat'l Income
Having allowed for the effects of inflation.
PPC
Production Possibility Curve
Economic Development
Measure of welfare
- GDP
- Education Indicators
- Health Indicators
- Social Indicators
Human Development Index (HDI)
Weighs up real national income per head (literacy, schooling, life expectancy) when determining rank of the most "developed" countries.
Sustainable Development
Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
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