The Economic Problem (Ch1)

Question	Answer
Goods	Tangible Products e.g. CD
Services	Non-tangible products e.g. trip to the cinema
Economic Welfare	The benefit or satisfaction received by an individual or society from the allocation of resources
Opportunity Cost	The next best alternative given up when an economic decision is made
Economic Goods	Goods that are scarce and therefore have an opportunity cost
Free Goods	Goods that have no opportunity cost e.g. air
Factor Market	The market for the factors of production that make other goods and services e.g. raw materials
Renewable resources	Resources that are able to be replenished over time e.g. wood
Non renewable Resources	Resources that are not able to be replenished over a period of time e.g. oil
Profit	When total income or revenue for a firm is greater than total costs
Free Market Economy	A market where there is limited government involvement in providing goods and services
Production Possibility Boundary	Image: PPF_graph.gif (image/gif)
Productive Efficiency	When a firm operates at minimum average total costs, producing the max. possible output from inputs
Allocative Efficiency	This is achieved when it is not possible to make anyone better off without making someone worse off
Productivity	A measure of efficiency, the ratio of inputs to outputs. Most common; output per worker
Human Capital	The skills, abilities, motivation and knowledge of labour
Division of Labour	Breaking the production process down into a sequence of tasks, with workers assigned tasks
Specialisation	The production of a limited range of goods by and individual factor of production/firm/country
Value Judgements	Statements or opinions made that are not testable/cannot be verified (views of individual)
Normative Statement	Opinions that require value judgements to be made
Positive Statements	Statements that can be tested against real world data

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The Economic Problem (Ch1)

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