Term
| Positive Economics vs Normative Economics |
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Definition
Positive economics: Factual statements about the world. What IS.
Normative economics: Value-based statements about WHAT SHOULD BE May be based upon information from positive economics. |
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Term
Following are examples of positive or normative?
Unemployment rate is too high.
Unemployment rate is 13%.
Government needs to intervene because unemployment rate is 13%. |
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Definition
Too high? Normative
13%? Positive
Government intervention? Normative. |
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Term
| Productive Efficiency versus Allocative Efficiency |
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Definition
Productive Efficiency: Providing goods and services at the lowest cost.
Allocative Efficiency: Distribution and allocation of resources in a society. Price is equal to marginal cost. Producers produce types of goods and services which are desirable and in demand. |
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Term
| Graph of Productive Efficiency |
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Definition
You will see a graph with any number of points. All points along the curve represent productive effiiciency. At this point, you can't produce more of 1 without producing less of the other.
Points will lie ON the curve. Any point under the curve ("inside points" represent inefficient economies. You could still produce more goods or services without an opportunity cost. |
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Term
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Definition
| Act of sellers freely engaging in market transactions; both seller and buyer better off after exchange. |
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Term
Ceritus Paribus (holding everything else constant):
An increase in product consumers want to buy at a given price,
what happens to the demand curve? Picture 1 |
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Definition
| Shifts to the right. Picture 1 |
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