TOPIC 1: Central Problem of Economics
Resources subtraction when one makes a choice
Anything and everything that can be used in the production of materials, goods and services.
opportunity cost
the next best alternative forgone.
Decision making at the margin
thinking about the net addition or subtraction when one makes a choice (decision based on the additional benefit and marginal opportunity cost)
Pareto Efficiency
Exist when it is not possible for someone to be made better off without someone else being made worst off.
Positive Statements
Factual statements that can be proven or disproven
Rational Choice
Involves weighing up the marginal benefits of each activity against its marginal opportunity cost
Relative Price
The price of one good compared with another(eg. good x is twice the price of good y)
Choice
The range of options available from which a decisions can be made.
Productive Efficiency
When a firm or economy produces maximum output at minimum cost.
Economics
comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") and νόμος (nomos, "custom" or "law"), hence "rules of the house (hold for good management)".[
Economic Efficiency
A situation of producing maximum output from a given set of inputs
Allocative Efficiency
A situation where the current combination of goods and services produced and sold gives the maximum satisfaction to each consumer at current level of income.
Economics
A social science that studies human society and how they allocate their scarce resources to create wealth
Normative Statements
A statement of opinion that cannot be proven or disproven
Free Market Economy
Capitalism
Command or Planned Economy
Communism
Scarcity
Referred to as the central problem of economics, implies that there are not enough resources to meet the needs of all economic agents.
Functions of price mechanism
Signalling, Incentive, Rationing
Mixed Economy
Socialism or Capitalism or Welfare State