Micro - Part 1 - How competitive markets work

• Scarcity


  A situation that arises because people have unlimited wants in the face of limited resources
• Economic goods 


  good that are scarce
• Free goods


  goods such as the Earth's atmosphere that are not normally regarded as being scarce
• Poverty


  a situation in which individuals lack the basic necessities of life or have low incomes relative to their fellow citizens
• Firm (business)


  an organisation that produces output (goods or services)
• Positive statement


  a statement about what is, i.e. about facts
• Normative statement


  a statement involving a value judgement about what ought to be
• Value judgement


  a statement based on your opinion or beliefs, rather than on facts
• What are the factors of production?

  Labour, capital, land, and enterprise
• What does opportunity cost represent in decision making?

  The value of the next-best alternative forgone
• What is a production possibility curve (PPC)?

  A curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources
• What does a trade-off imply in decision making?


  A situation in which the choice of one alternative requires the sacrifice of another
• What are capital goods?


  Goods used as part of the production process, such as machinery or factory buildings
• What are consumer goods?

  Goods produced for present use (consumption)
• What does long-run economic growth refer to?

  Expansion in the productive capacity of the economy
• What are the key concepts related to factors of production?

  • Resources used in the production process
  • Includes labour, capital, land, and enterprise
• What are the implications of opportunity cost in economics?


  • Represents the value of the next-best alternative forgone
  • Important for making informed decisions
• How does the production possibility curve (PPC) illustrate economic concepts?


  • Shows maximum combinations of goods/services produced
  • Reflects available resources and time constraints
• What is the significance of trade-offs in economic decision making?

  • Indicates choices require sacrifices
  • Essential for evaluating alternatives
• What role do capital goods play in production?

  • Used in the production process
  • Examples include machinery and factory buildings
• What distinguishes consumer goods from capital goods?

  • Consumer goods are produced for immediate consumption
  • Capital goods are used to produce other goods
• What does long-run economic growth indicate about an economy?

  • Represents an expansion in productive capacity
  • Reflects improvements in technology and resources
• What is the definition of scarcity in economics?

  A situation that arises because people have unlimited wants in the face of limited resources
• What are economic goods?

  Goods that are scarce
• What are free goods?

  Goods such as the Earth’s atmosphere that are not normally regarded as being scarce
• What is poverty?


  A situation in which individuals lack the basic necessities of life or have low incomes relative to their fellow citizens
• What is a firm in economics?


  An organisation that produces output (goods or services)
• What is a positive statement?


  A statement about what is, i.e. about facts
• What is a normative statement?


  A statement involving a value judgement about what ought to be
• What is a value judgement?


  A statement based on your opinion or beliefs, rather than on facts
• What are the factors of production?

  Resources used in the production process, including labour, capital, land, and enterprise
• What is opportunity cost?

  The value of the next-best alternative forgone in decision making
• What is a production possibility curve (PPC)?

  A curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources
• What is a trade-off?

  A situation in which the choice of one alternative requires the sacrifice of another
• What are capital goods?


  Goods used as part of the production process, such as machinery or factory buildings
• What are consumer goods?

  Goods produced for present use (consumption)
• Why do societies face the economic problem?

  Because they have finite resources but unlimited wants
• What does scarcity force us to do?

  Make choices which leads to sustainability
• How can positive and normative statements be distinguished?

  Positive statements are factual and can be tested, while normative statements are opinion-based
• What roles do households play in the economy?

  Households are consumers of goods and services and provide the workforce for businesses