unit 1 economics methodology and the economic problem

• economics is seen as a social science
• social science 


  analyses both the behaviour of human beings, individuals, groups and society
• uses scientific methodology
• natural science 


  more rigorous or reliable, study natural phenomena, no moral or subjective views
• social science 


  can't be entirely neutral contain subjectivity and value judgements because they study human behaviour
• natural sciences


  large data sets
• social science


  small data sets
• production


  process by which various inputs are transformed into outputs
• inputs 


  factors of production/ factor of inputs
• outputs


  economic goods, products and services
• process of production is carried out by firms
• factors of production


  land, labour, capital, enterprise
• land 


  land incudes all natural physical resources e.g. fertile farmland, the benefits from a temperature climate or harnessing of wind power and solar power and other forms of renewable energy
• labour 


  labour is the human input into production of economic goods. Notion of Labour not only n.o. of labour (the labour force) but also their different physical attributes, skills, education and effort. The economic reward for labour is wages.
• capital


  capital is the stock of assets that are used in production.
• capital goods


  refers to any premises, buildings, machinery, tools and equipment that are used to produce goods. Also known as capital goods and they have to be produced themselves.
• interest 


  the economic reward for capital is interest which has to be produced and includes financial assets which can produce interest.
• enterprise 


  the process of coordinating and organising the other 3 factors of production in the production process. It also includes the risks associated with it.
• entrepreneurs


  enterprise is a resource which can be provided by entrepreneurs
• reward for enterprise 


  profit
• non renewable resources


  finite resources
• renewable resources


  infinite resources
• opportunity cost


  whenever a decision is made in economics there is always an alternative that was not chosen. This alternative the cost of giving up the next best alternative is called the opportunity cost
• opportunity cost definition


  is the next best alternative foregone
• economic needs and wants

  the central purpose of economic activity is to produce goods and services to satisfy people's needs and wants
• economic need


  something that is necessary for human survival
• economic want


  is something that is desirable but not needed for human survival
• economic welfare 


  process of satisfying needs and wants is achieved through improving economic welfare
• economic welfare definition


  the well-being or quality of life of an individual, group or whole economy/ whole country
• its difficult to measure economic welfare
• improvement of economic welfare

  increased income and wealth but some elements of well-being that money can't buy
• economic systems


  concerned with the type and quantities of economic goods (products and services) produced and the allocation of resources to produce them.
• planned or command economy


  determined only by the government (socialist or communist)
• mixed economy


  determined partially by government or non-market forces and partly by market forces (capitalist)
• market economy


  no government intervention determined by market forces (demand and supply)
• basic economic problem 


  there are scarce resources to meet humans unlimited wants
• humans must choose as individuals, groups, countries or as society as a whole to allocate these resources
• individual choices


  individuals make economic choices several times a day by buying goods (demand) will affect production (supply) decisions by firms and non-commercial organisations.
• government choices


  the uk government spent around £842 billion last year on providing public services and payments.
• society choices


  balancing increasing output to satisfy the needs and wants against the consequences for climate change, pollution and environmental damage