MICRO Topic 1a the basic economic problem
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- Created on: 14-10-20 17:34
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- Basic Economic Problem
- Scarcity and choice
- Resources are scarce (finite). Wants and needs are infinite. This means that choices have to be made on how they are employed.
- Making choices involves a trade off which means that something is sacrificed.
- The idea of giving something up is called opportunity cost.
- Opportunity cost definition: the value of the next best alternative that is foregone when a choice is made
- The idea of giving something up is called opportunity cost.
- Making choices involves a trade off which means that something is sacrificed.
- Resources are scarce (finite). Wants and needs are infinite. This means that choices have to be made on how they are employed.
- The economic problem
- Humans have unlimited wants and needs, but the world has a finite amount (limited) resources. Choices have to be made on how these resources are allocated.
- Economic agents make these decisions. They can only acquire a limited amount of resources at any moment in time
- Economic agents: consumers (households), businesses (firms), the government.
- Economic agents make these decisions. They can only acquire a limited amount of resources at any moment in time
- resources have to be allocated between competing uses.
- Humans have unlimited wants and needs, but the world has a finite amount (limited) resources. Choices have to be made on how these resources are allocated.
- Economic agents make these decisions. They can only acquire a limited amount of resources at any moment in time
- Economic agents: consumers (households), businesses (firms), the government.
- Economic agents make these decisions. They can only acquire a limited amount of resources at any moment in time
- Humans have unlimited wants and needs, but the world has a finite amount (limited) resources. Choices have to be made on how these resources are allocated.
- The economic problem decides what is produced, how it is produced and for whom it is produced, given the scarcity of resources.
- an economy is a system that attempts to solve the basic economic problem of scarcity.
- Humans have unlimited wants and needs, but the world has a finite amount (limited) resources. Choices have to be made on how these resources are allocated.
- Positive and normative economics
- Positive economics studies the subject scientifically/ objectively.
- Positive statements can be proved true or false using evidence that supports of refutes them. Statements about the future can be positive.
- Economists use positive and normative economics to find out how economies work and to influence policy debates.
- Normative economics uses value judgement.
- Normative statements cannot be supported or refuted. They are opinions on how markets and economies should work.
- Normative statements usually contain words like 'should' and 'ought'. HOWEVER, positive statements can also contain them.
- Normative statements cannot be supported or refuted. They are opinions on how markets and economies should work.
- Normative economics uses value judgement.
- Economists use positive and normative economics to find out how economies work and to influence policy debates.
- Positive statements can be proved true or false using evidence that supports of refutes them. Statements about the future can be positive.
- Normative economics uses value judgement.
- Normative statements cannot be supported or refuted. They are opinions on how markets and economies should work.
- Normative statements usually contain words like 'should' and 'ought'. HOWEVER, positive statements can also contain them.
- Normative statements cannot be supported or refuted. They are opinions on how markets and economies should work.
- Positive economics studies the subject scientifically/ objectively.
- Economic resources (factors of prod.)
- Land- natural resources
- Labour- the quantity and quality of human resources.
- Capital- man made aids to prod. i.e machinery.
- Entrepreneurship- seeking out profitable opportunities for prod. and risk-taking to attempt to exploit them.
- Entrepreneurs take risks with their own and other's financial capital. They are motivated by profit.
- Scarcity and choice
- Normative statements can contain positive economics to back it.
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