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MicroEconomics > 1.1 > Flashcards

1.1 Flashcards

1.1.1. Economics as a social science, 1.1.2. Positive and Normative Statements, 1.1.3. The Economic Problem, 1.1.4. Production Possibility Frontiers, 1.1.5. Specialisaion and Division of Labour, 1.1.6. Types of Economies

1
Q

What is Ceteris Paribus?

A

‘All other things remain equal’-An effect one variable has on another provided all other variables stay the same

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2
Q

What is a Positive Statement?

A

Fact -Describe the world as it is without making any judgements. Based on facts and can be proven or disproven.

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3
Q

What is a Normative Statement?

A

Opinion- Make a value Judgement about what ought to be or should be. They are based on personal beliefs, values rather than objective facts.

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4
Q

What are examples of Positive Statements?

A

E.g. Data, Facts, Evidence

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5
Q

What are examples of Normative Statements?

A

E.g. Opinion, Personal Perspectives

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6
Q

What’s a Value Judgement?

A

Your subjective opinion on whether something is good or bad

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7
Q

What does Scarcity mean?

A

When resources are finite or limited.

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8
Q

What are Renewable Resources?

A

Naturally replenish themselves

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9
Q

Examples of Renewable Resources:

A

E.g. Wind, Solar

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10
Q

What are Non-Renewable Resources?

A

Don’t replenish themselves.

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11
Q

What are examples of Non-Renewable Resources:

A

E.g. Coal, Oil, Gas

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12
Q

What is The Economic Problem?

A

Unlimited wants and needs but we have finite resources. Not enough resources to fit the demand.

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13
Q

What are the three Economic Agents? (Part of economy-What makes up)

A

Producers (Makers)
Consumer’s (Buyers)
Government (Rulesetters)

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14
Q

What is Opportunity Cost?

A

Choosing one things means giving up another

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15
Q

What are the Four Factors of Production?

A

Capital
Enterprise
Labour
Land

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16
Q

What does a Straight Line PPF look like?
(Including points A,B and C and what they mean)

A

|
| \
| \
| \
| \
|________________

Y Axis Lable =Good A
X Axis Lable =Good B
A( inside line)= Productivity Inefficient
B (On line)= Productively Efficient
C(Outside line)= Unachievable

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17
Q

What does a Concave PPF look like?
(Including points A,B and C)

A

Search up or 20/09/23 in notes
Y Axis=Good A
X Axis=Good B
Same points as Straight line PPF:
A( inside line)= Productivity Inefficient
B (On line)= Productively Efficient
C(Outside line)= Unachievable

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18
Q

What does Productive Efficiency Mean?

A

Max units of output with the given factors of production (resources)

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19
Q

What does Labour Productivity mean?

A

Output per worker

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20
Q

What does Adam Smiths theory suggest?
(Pin Theory-Specialisation)

A

He suggests that 10 Workers can make 10 Pins individually but if they were to specialise in a small task they can produce 48,000 pins per day.

21
Q

What are the Advantages of Specialisation?

A

-Increases Job expertise
-Increased Productivity
-Capital used more intensively
-Lower Unit Costs

22
Q

What are the Disadvantages of Specialisation?

A

-Repetition Lowers Morale
-Potentially higher labour turnover
-Can be limited by Capital
-Can require Mass Market

23
Q

What is the law of diminishing marginal return?

A

After some optimum level of capacity is reached adding an additional factor of production will actually result in a smaller increase in output.

24
Q

Example of diminishing marginal return:

A

E.g. Adding more workers to a manufacturing line in a factory will eventually make it less efficient as they could get in each others ways

25
Q

What is specialisation and Trade?

A

Many major producers who specialise find that they need bigger markets to achieve their full production potential. So they may need to find trading partners to create enough demand for their goods and services that are left over.

26
Q

What are the Advantages of Specialisation and Trade?

A

-Can lead to more output/efficiency of workers
-Access to more goods and services

27
Q

What are the Disadvantages of Specialisation and Trade?

A

-Low morale/boredom of workers
-less output if high staff turnover
-loss of uk industries

28
Q

What is Division of Labour?

A

When employees are split up into different, smaller parts which is taken out by different workers who are specialized in the production of that specific task

29
Q

What’s the function of money?

A

-Medium of exchange: Facilitates transactions between buyer and seller
-Unit account: used to measure value and cost of production and assets
-Standard of deferred payment: way to settle debt

30
Q

What are the three types of economies?

A

Free Market Economy, Command Market Economy and Mixed Market Economy

31
Q

What’s a Free Market Economy?

A

No government intervention. Price of Goods and Services is determined by Supply and Demand expressed by sellers and buyers.

32
Q

What are the Advantages of a Free Market Economy?

A

-Price is a good indicator of how to allocate resources
-Lower prices due to competition
-Competition drives firms to produce what consumers want
-Competition drives new, innovative goods and services

33
Q

What are the Disadvantages of a Free Market Economy?

A

-Income and wealth inequality will increase
-Public Parks wont be developed or maintained
-Necessities may be underproduced (healthcare, education)
-Dangerous products might be underpriced (alcohol, tobacco)
-Lower environmental responsibility increasing pollution

34
Q

What’s a Command Market Economy?

A

Lots of Government intervention. Government owns most of country’s scarce resources. The state allocates resources. Its a key feature of a Communist Society.

35
Q

What are the Advantages of a Command Market Economy?

A

-Government set wages and own all land so no inequality
-Necessities like healthcare and education provided for everyone
-Unhealthy/harmful products limited or prohibited

36
Q

What are the Disadvantages of a Command Market Economy?

A

-No Price signals to know what to produce
-No profit motive to take risks and innovate
-No profit motives to improve efficiency
-No profit motive leading to less choice for customers

37
Q

What’s a Mixed Market Economy?

A

Some Government intervention. Some resources are owned by the public and some are owned by a private sector. Nearly all economies are mixed.

38
Q

What are the Advantages of a Mixed Market Economy?

A

-Provides capital through the promotion of innovation
-Permits spending in systems that a pure capitalist economy would neglect
-Provides goods or services whenever they’re required
-Protects the general wellbeing of the population
-Provides an equal level of economic control within society

39
Q

What are the Disadvantages of a Mixed Market Economy?

A

-Common corruption and kickbacks
-Lack of market equilibrium
-Lengthy decision-making processes
-Overgrowth or undergrowth of the private sector
-Creation of private businesses which could disrupt the economy

40
Q

What is Privatization?

A

Private Sector Firms takeover an industry originally ran by the government. Profit Motive.

41
Q

What is Nationalization?

A

The Government takeover an industry originally ran by the Private Sector Firms. Best interest of Consumers.

42
Q

What are the Advantages and Disadvantages of Government intervention?

A

Advantages:
-Provide Public Goods (Parks)
-Provide Merit Goods (Education)
-Reduce Inequality
-Government Regulations can Protect environment

Disadvantages:
-Government Failures
-Lack of incentives to be efficient in Public Sector
-Income Tax
-Welfare
-Less Choices in Government ownership

43
Q

What’s a Market?

A

Anywhere a buyer and seller come together to transact. Don’t have to be in the same place could be online.

44
Q

What are Sub-Markets?

A

The Market for most goods and services can be broken down into sub-markets which tailor to different needs and wants of consumers.

45
Q

What’s an example of a Sub-Market?

A

E.g. Car Market would be sub-marketed into electric and hybrid vehicles

46
Q

What are some key characteristics of a Free Market Economy?

A

-Freedom to trade internationally
-Limited Market intervention
-Small Size Government
-Low Tax environment
-Consumer preferences determine resources allocation

47
Q

Who was Karl Marx? What did he say about Adam Smith’s ideas?

A

He developed many of Adam Smith’s ideas on Capitalism/free market economies but mostly considered them to be a negative impact. He agreed it would lead to an increase in productivity but said that the labour impact would be terrible.

48
Q

What’s a Transition Economy?

A

An economy that is involved in a process of moving from a command economy to a mixed or free market economy.

MicroEconomics (8 decks)

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