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What are 'positive economics?'
This is a statement based on facts and testable theories. For example, CPI is 2%
What are 'Normative economics'?
THis is based on opinion or a value judgement. For example, Govt should increase taxes.
What is a opportunity cost?
Its sacrificing not producing A but producing B.
What do PPF graphs show?
They show the maximum output that a simplified economy can produce if the economy is maximising the use of it's resources and operating efficiently.
On the PPF curve, place these points on the graph.
A - Inefficient
B - Productively efficient. It is impossible to produce more goods without losing on services.
C - Impossible.
- A - Inside the curve
- B - On the line
- C - Out of the boundary
What is demand?
The individual demand curve illustrates the price are willing to pay for a particular quantity of good.
A shift to the right in the demand curve can occur for different reasons. Some include:
- 1 - An increase in disposable income. This can occur for a number of reasons such as higher wages or lower taxes.
- 2 - An increase in the quality of the good
- 3 - Advertising can increase in brand loyality to the goods and increase the demand.
- 4 - An increase in the price of substitutes
- 5 - A fall in the price of complements
What does supply refer to?
It refers the the quantity of a good that the producer is willing to produce at any given price. It is assumed that as the price increases, the level of supply increases.
There can be an increase is supply for a number of reasons, they include: