THEME 1 – Markets and Market Failure
Economic Data
Real value - Number adjusted for infaaono
Base year - The year that other values are compared to – it will ofen have a value of 100 for the
given measurement
Index number – Showing a staasac relaave to a base yearo
Normatve Statement – A statement that cannot be supported or rebufed as it is opinionated
Positve Statement - A statement that can be supported or rebufed with factso
Ceteris Paribus – All other things being equalo While one variable is changed, the assumpaon that
while one variable is being invesagated all others are constanto
The Economic Problem – The fact that people have infnite wants but limited resources
meaning they need to be allocated between useso
Choices will always have an opportunity cost, the benefts forgone of the nextt best
alternaaveo
The factors of producton are the things needed to produce a good or serviceo They have
rewards called factor payments when economic agents use them for a period of amee
- Land. All natural resources including materials and lando Rewarded with rento
- Labour. The workforce needed to make the producto Rewarded with wageso
- Capital. The tools or machines needed to make the produceo Rewarded with renangg
leasing them or a share of their proftso
- Enterprise. The seeking of proftable opportuniaes by individualso Reward is profto
Producton Possibility Fronter
PPF - A curve showing the maxtimum potenaal level of outputo This can be used for
individual frms or the economy as a wholeo Possible axtis are consumer and capital goodso
If a frm or economy is operaang on the PPF it is at
full capacitye The level of output at which no exttra
producaon can take place without increasing the
factors of producaono
A movement onto the PPF is short-run economic
growth and an outwards movement of the PPF is
long run economic growtho
Economic Data
Real value - Number adjusted for infaaono
Base year - The year that other values are compared to – it will ofen have a value of 100 for the
given measurement
Index number – Showing a staasac relaave to a base yearo
Normatve Statement – A statement that cannot be supported or rebufed as it is opinionated
Positve Statement - A statement that can be supported or rebufed with factso
Ceteris Paribus – All other things being equalo While one variable is changed, the assumpaon that
while one variable is being invesagated all others are constanto
The Economic Problem – The fact that people have infnite wants but limited resources
meaning they need to be allocated between useso
Choices will always have an opportunity cost, the benefts forgone of the nextt best
alternaaveo
The factors of producton are the things needed to produce a good or serviceo They have
rewards called factor payments when economic agents use them for a period of amee
- Land. All natural resources including materials and lando Rewarded with rento
- Labour. The workforce needed to make the producto Rewarded with wageso
- Capital. The tools or machines needed to make the produceo Rewarded with renangg
leasing them or a share of their proftso
- Enterprise. The seeking of proftable opportuniaes by individualso Reward is profto
Producton Possibility Fronter
PPF - A curve showing the maxtimum potenaal level of outputo This can be used for
individual frms or the economy as a wholeo Possible axtis are consumer and capital goodso
If a frm or economy is operaang on the PPF it is at
full capacitye The level of output at which no exttra
producaon can take place without increasing the
factors of producaono
A movement onto the PPF is short-run economic
growth and an outwards movement of the PPF is
long run economic growtho
