Nature of economics

all other vaiables remain constant

objective statements based on evidence or facts that can be proved or disproved

subjective statements based on value judgement that cannot be proved or disproved

resources are finite but wants are infinite

land, labour, capital, enterprise

natural resources and raw materials

human effort involved in the production of goods and services

man-made aid used to produce other goods and servies

bringing together the other factors of production and taking risks

resources than can be replenished within a lifetime

resources that cannot be replenished within a lifetime

the benefit lost from the next best alternative foregone

goods that are created from resources that are limited in supply

goods that are unlimited in supply

the maximum potential output of an economy when all resources are fully and efficiently employed

goods that are used to produce other goods and are not used up in the process

goods that are end products and give satisfaction to consumers

obtainable

unobtainable

inefficient allocation of resources

productive efficiency

costs or benefits of the next unit of output

constant

increase in the productive potential of an economy

fall in current living standards

increase in the productive potential of the economy

the decrease in the productive potentital of an economy

economic growth

economic decline

change in the combination of the two goods being produced

discovery of new natural resources, increase in the size of the workforce, technological advancements, improvements in education and training that lead to a more productive workforce

natural disasters, depletion of natural resources, decrease in the size of the workforce

task is broken up into several component tasks

worker specialises in one particalar task

lower training costs, higher labour productivity, less time wasted when moving from one task to another, enables prodcution line methods to be emplyed and allows an increased use of machinery

task repetition leads to monoty and boredom and a decrease in worker motivation, decrease in motivation leads to a decline in worker productivity, loss of skills, lack of variety

more internationally competive exports, economic growth, higher income and better standard of living, greater choice of imports

structural unemployment, over-dependency on other countries resources, increased rate of resource depletion, industries may become unable to compete

size of the market, type of product, transport costs

medium of exchange, store of value, measure of value, method of deferred payment

allocate the scarce factors of production

what to produce, how to produce it, who to produce it for

free market economy

free market economy

command economy

private ownership of resources, market forces (supply and demand) determine prices, consumers aim to maximise utility, producers aim to maximise profits, resources are allocated by the price mechanism

public ownership of resources, state determines prices, state allocates resources, producers aim to meet production targets allocated by the state, greater equality of income and wealth

economy that has no government intervention in the allocation of resources

economy in which all of the resoruces are owned and allocated by the government

combination of a free market economy and a command economy

profit incentive, greater variety of goods and services, competition leads to innovation and lower prices, more efficient use of scarce resources

inequality, monopolies, externalities, asymmetric information

greater equality, less unemployemnt, no exploitation, externalities can be accounted for

inefficient allocation of resources, lack of competition and innovation, bureaucratic costs, restrictions on freedom of choice

provision of public goods and services, redistribution of wealth, defence and internal security