Ceteris Paribus
other things being equal
positive statements
objective statements that can be tested by referring to see if economic ideas are correct or incorrect
normative statements
subjective statements which contain a value judgements (opinons)
economic system
set of institutions within which a community decides what, how and for whom to produce
market economy
an economy in which goods and services are purchased through the price mechanism in a system of market
mixed economy
an economy that contains both a large market sector and large non-market sector in which planning mechanism operates
command economy (planned economy)
an economy in which government officials or planners allocate economic resources to firms and other productive enterprises
free goods
do not use up any factor inputs when supplies
basic economic problem
how available scarce resources can be used to satisfy people's infinite needs and wants(Limited resources VS infinite needs and wants)
central purpose of economic activity
production of goods and services to satisfy people's needs and wants
key economics decision
What to produce ?How to produce it ? Who to produce it for ?
fundamental economic problem
how best to make decisions about the allocation of scarce resources among competing uses so as to improve and maximise human happiness and welfare
fundamental economic problem results in
scarcity
scarcity
choice have to be made about how scarce resources are allocated between different uses
opportunity cost
measures the cost of any choice in terms of the next best alternative forgone
inter-temporal choice
choice between income now and income in the future
budget constraint
people have to think carefully about how they spend their limited incomes
rationing
way of allocating scarce goods and service when market demand exceeds the available supply