Economic methodology and the economic problem

• Allocative price function: Prices allocate resources away from markets with excess supply to markets with excess demand.
• Choice: Selecting one of multiple alternatives when deciding how to allocate scarce resources.
• Capital/producer goods: Goods used in the production of other goods.
• Factors of production: Inputs of the production process, such as land, labour, capital and enterprise.
• Consumer good: Goods consumed by households & individuals, used to satisfy needs and wants.
• Finite resource: Non-renewable resource that becomes increasingly scarce.
• Fundamental economic problem: Deciding how to best allocate scarce resources to maximise overall economic welfare.
• Incentive price function: Prices create incentives for people to adjust their economic transactions.
• Need: Something necessary for human survival, e.g. food, shelter.
• Normative statement: Statements including value judgements, that cannot be easily proved/disproved.
• Renewable resource: Restorable resource that can be replenished.
• Rationing price function: Prices rise to ration demand for goods.
• Production possibility frontier: A curve displaying the various possible combinations of two products that can be produced with finite resources.
• Opportunity cost: Loss of other alternatives due to selecting one of a set of options.
• Positive statement: Statements including facts, that can easily be proved/disproved.
• Scarcity: Resulting from the concept of infinite wants and needs, yet limited resources.
• Signalling price function: Prices provide information to sellers and buyers, influencing economic decisions.
• Want: Something desirable, yet not necessary for human survival.