1.1.1 - 1.1.3
Definition of Ceteris Paribus
Economists isolate the relationship between two variables by assuming all influencing factors are held equal.
Positive Statements
They are objective statements that can be tested, amended or rejected by referring to available evidence. e.g if the govt raises the tax on beer, this will lead to a fall in profits of beer producers
Normative Statements
They are subjective statements that carry value judgements or opinion. This can influence economic decision making e.g high unemployment is more harmful to a country than high rates of inflation
Economic Problem
There are unlimited wants and finite resources so scarcity and choice is the basic problem. Emerging technologies may change our perpection of scarcity. There is an opportunity cost involved.
Factors of Production
Land, Labour, Capital, Enterprise
Land
The stock of natural factor resources available for production
Labour
The quantity and quality of the human input available for the production process
Capital
Man-made goods used to supply other products such as factories, hardware and software
Enterprise
Entrepreneurs organise inputs and take risks when seeking to exploit market opportunities
Capital-Labour Substitution
Replacing labour with automation
Non-Renewable Resources
Finite in supply such as oil, coal and natural gas. The rate of extraction depends on the market price
Renewable Resources
Over extraction threatens the long run supply of these inputs such as solar energy and tidal power
Opportunity Cost
The unavoidable trade-offs in the presence of scarcity, the cost of a choice measured by the next best alternative foregone e.g work-leisure choices, govt. spending priorities, investing today for consuming tomorrow
Land
Rent
Labour
Wages
Capital
Interest
Enterprise
Profits
Economic agents
A participant in an economic system e.g consumer, buisness or the govt