A
The value of the next best alternative foregone when making an economic decision
What is opportunity cost?
All other factors held constant
What is the meaning of 'ceteris paribus'?
When two goods are produced together from the same origin / raw material
What is joint supply?
The fundamental economic problem
What is scarcity?
What are interest rates?
When government spending is greater than tax revenues
What is a budget deficit?
An economic system that combines elements of capitalism and socialism
What is a mixed economy?
A graph that shows how much an economy can produce given existing resources
What is a PPF?
Land, labour, capital, entrepreneur
What are the factors of production?
60-70% of AD
What percentage of AD is consumption?
What is to be produced?
How should it be produced?
Who will benefit from the goods and services produced?
What are the 3 fundamental economic questions?
Economic growth, stable prices, full/low unemployment, balance of payments
What are the macroeconomic objectives?
A measure of the purchasing power of a household or individual, taking into account the effect of inflation
What is real disposable income?
Producers, consumers and the government
Who are the economic agents?
Statements that make a value judgment about what ought to be or what should be
What is a normative statement?
Productivity, indirect taxes, number of firms, technology, subsidies, weather, costs of production
What are the conditions of supply?
A behavioral economic theory suggesting that consumers spend more when their wealth increases, even if their income does not
What is the wealth effect?
An optimal distribution of goods and services taking into account consumer's preferences
What is allocative efficiency?
The scientific study of human society and social relationships
What is a social science?
The total amount of goods and services that producers make and are willing to sell at a certain price within a certain time
What is aggregate supply?
A payment from the government to a producer to lower their costs of production and encourage them to produce more
What is a subsidy?
The demand for goods which are substitutable
What is competitive demand?
The ability to produce the maximum possible output from a given set of resources at the lowest possible cost
What is productive efficiency?
A decrease in the rate of economic growth can lead to a disproportionately larger drop in investment
What is the negative accelerator/decelerator effect?
A resource that can be replenished naturally over time
What are renewable resources?