Economics

What would a straight line PPF show?

A constant opportunity cost.

Define Incentives

A set of external (rather than intrinsic) motivators that explain people's choices. Incentives are essential in making policies work.

What is a command economic system?

A system where the government determines what goods should be produced, how much, and the price.

What is a mixed economic system?

A system which allows a level of private economic freedom but also for governments to intervene to achieve social aims.

What is a Laissez-faire economic system?

An economic system free from governments interference. Individuals and firms pursue their own self-interests without any central direction or regulation. The central institution is the free market.

Define Economic Resources

Basic items used in production, for example, natural, capital and human resources.

What are the 3 factors of production?

Capital, Labor, and Land.

What are the 3 main economic systems?

Command economies, Laissez-faire economies, and mixed economies.

Define Wants

Desires for non- essential items.

In a PPF graph, what would an outward shift of the curve represent?

Economic growth.

What is the free market economy based on?

Free market economy is based on supply and demand with little or no government control. Buyers and sellers can transact freely based on mutual agreement on price without state intervention.

Define Natural Resources

From nature that can be exploited for economic gain, for example, raw materials and land.

Define Capital Resources

Goods produced and used to make other goods and services, for example, tools and equipment.

Specialisation and Trade

Individuals and countries should specialize in things they have a competitive advantage in and then trade with others that specialize in something else. This trade is mutually beneficial.

What is the slope of the PPF curve also known as?

Marginal rate of transformation (MRT)

In a mixed economic system, what are some reasons government would intervene?

Minimise market inefficiencies, provide public goods, redistribute income and stabilise macroeconomy (promoting low levels or employment/inflation)

Define Normative Economic Statement

Normative economic statements are opinion based, so they cannot be proved.

Define Positive Economic Statement

Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved.

What is price?

The basic coordinating mechanism in a free market system. It is the amount of product that sells per unit, reflecting what society is willing to pay.

Define Human Resources

The efforts of Humans.

Define Needs

The essentials in life, such as food and shelter.

Define Opportunity Cost

The loss of other alternatives when one alternative is chosen for the best use of time/money.

What is the basic Economic Problem: Scarcity vs. Choice

The problem of having unlimited wants, but limited resources to satisfy.

In a PPF graph, what does the slope reflect?

The slope reflects the law of increasing opportunity cost and the trade-off between producing one good or another.

Define Microeconomics

The study of how consumers, workers and firms interact to generate outcomes in specific markets.

Define Macroeconomics

The study of production, employment, prices and policies on a nationwide scale. Macroeconomists predict the overall economy.

Define Scarcity

The tension between infinite wants and finite resources which underlines the basic economic problem.