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AQA A Level Economics Theme 1 > 1.1 > Flashcards

1.1 Flashcards

1
Q

What is the Ceteris Paribus assumption?

A

The “ceteris paribus” assumption means “holding other things constant” or “all other things being equal”.

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2
Q

What is the Ceteris Paribus assumption used for?

A

It is used to isolate the effect of a specific variable while keeping all other relevant factors constant. It allows economists to analyse the relationship between variables without the complications.

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3
Q

Define ‘elasticity’.

A

A change in behaviour based on price or income changes.

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4
Q

Explain the concept of opportunity cost.

A

The cost of a foregone opportunity. The cost of the best alternative when making a choice.

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5
Q

What is a positive statement?

A

A statement which can factually be proved to be true.

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6
Q

What is a normative statement?

A

A subjective statement given from a point of view.

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7
Q

Define ‘subsidy’.

A

A payment from the government to a producer to lower their costs of production and encourage them to produce more.

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8
Q

Define ‘outsourcing’.

A

The process of hiring third parties to conduct services that were typically performed by a company itself.

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9
Q

What is the law of demand?

A

When the price of a good/service decreases, the quantity demanded increases.

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10
Q

What are the 4 main economic agents?

A
  1. Households/Individuals
  2. Firms
  3. Government
  4. Central banks
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11
Q

What is the economic concept of utility?

A

A benefit or satisfaction a consumer gains from a good/service, relating to consumer choices.

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12
Q

What is the economic problem?

A

When there are finite resources available to supply infinite wants.

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13
Q

Define ‘trade-offs’.

A

A range of alternatives given up when a different alternative has been chosen. In other words ‘opportunity costs’.

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14
Q

Define ‘incentives’.

A

Financial motivations for people to take certain actions.

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15
Q

How do economic agents use economic incentives?

A

Economic agents use incentives to tell them what goods and services to produce as they are provided with the information required.

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16
Q

How do economic agents know for whom to produce?

A

Producers use demand and supply to know for whom to produce. If there is demand for a product, a firm may wish to supply other for profit.

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17
Q

How to produce?

A

Firms will combine the factors of production in order to produce a good or service.

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18
Q

What are the three types of economies?

A
  1. Free market economy
  2. Command economy
  3. Mixed economy
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19
Q

What are the four factors of production?

A
  • labour
  • land
  • capital
  • enterprise
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20
Q

Define ‘austerity’.

A

A government fiscal policy which is aimed at reducing a government’s deficit (or borrowing).

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21
Q

What is an economy?

A

A system which attempts to solve the basic economic problem (scarcity).

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22
Q

What is an economy?

A

A system which attempts to solve the basic economic problem (scarcity).

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23
Q

Define ‘capital’.

A

A stock of manufactured resources used in production of goods and services.

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24
Q

Define ‘enterprise’.

A

The seeking out of profitable opportunities for production and taking risks in attempting to exploit these.

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25
Q

Define ‘free goods’.

A

Goods that are unlimited in supply and therefore have no opportunity cost.

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26
Q

Define ‘fixed capital’.

A

Economic resources such as factories and hospitals which are used to transform working capital into goods and services.

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27
Q

Define ‘human capital’.

A

The value of the productive potential of an individual or group of workers.

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28
Q

Define ‘working or circulating capital’.

A

Resources that are in the production system waiting to be transformed into goods or other materials before being finally sold to the consumer.

29
Q

Define ‘production possibility frontier’.

A

A curve on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.

30
Q

Define ‘public good’.

A

A good that is non-exclusive and non-rivalrous.

31
Q

Economics objectives

A
  • benefit
  • utility
  • compromise
32
Q

PPF traits

A
  • as the output of good x increases, the output of good y decreases
  • illustrates the problem of choosing how to use scare resources when producing goods and services
  • used to show different combinations of output for two products
  • can be used to show the concepts of scarcity, choice and opportunity cost
33
Q

Define ‘marginal’.

A

The cost of adding an additional unit.

34
Q

What is the “invisible hand” theory about market forces?

A

The theory, proposed by Adam Smith, suggests that the government should let individuals trade with one another freely and that market should determine the worth of goods sold on the market.

35
Q

Shifts in the PPF curve.

A

Outward shift= expansion (progress in economic growth)
Inward shift= counteraction (decline in economic growth)

36
Q

Define ‘economic growth’.

A

The expansion of the productive potential of the economy. It can be depicted by an outward shift in PPF or an outward shift in a country’s LRAS curve.

37
Q

How is economic growth measured?

A

The change in GDP ( gross domestic product) at constant price or a percentage change in the total output of a country.

38
Q

Define ‘Gross Domestic Product’.

A

A measure of the value of the total final output of goods and services produced by that economy at a certain period of time.

39
Q

What are the four types of unemployment?

A
  1. Frictional
  2. Cyclical
  3. Seasonal
  4. Structural
40
Q

Define ‘structural unemployment’.

A

A long- lasting unemployment that comes about due to shifts in an economy. This happens because there is a mismatch between the skills in demand and the skills available in the economy.

41
Q

Define ‘cyclical unemployment’.

A

Unemployment caused by the changes in business cycles, this is usually economic upturn or downturn (recessions and declines during economic expansions).

42
Q

Define ‘frictional unemployment’.

A

Unemployment that arises when workers are searching for new jobs or are transitioning from one job to another.

43
Q

Define ‘seasonal unemployment’.

A

Unemployment that occurs at particular times of the year when demand for labour is lower than usual.

44
Q

How can land as a factor of production cause an increase in economic growth?

A
  • new mine
  • rezone
  • land reclamation
  • increased resources
45
Q

How can land as a factor of production cause a declinein economic growth?

A
  • natural disaster
  • weather
  • civil unrest
  • obsolete equipment
46
Q

How can labour as a factor of production cause an increase in economic growth?

A
  • specialising/expertise
  • motivation
  • training
  • mobility of labour
47
Q

How can labour as a factor of production cause a decline in economic growth?

A
  • disease/illness
  • loss of motivation
  • aging population
48
Q

How can labour as a factor of production cause a decline in economic growth?

A
  • disease/illness
  • loss of motivation
  • aging population
49
Q

How can capital as a factor of production cause an increase in economic growth?

A
  • investment
  • grants
  • FDI
50
Q

How can capital as a factor of production cause a decline in economic growth?

A
  • inability to access credit
  • loans
  • rising interest rates
51
Q

How can enterprise as a factor of production cause an increase in economic growth?

A
  • access grants/schemes
  • training
  • education
  • culture of entrepreneurship
52
Q

How can enterprise as a factor of production cause a decline in economic growth?

A

Lack of motivation

53
Q

What are the three sectors the economy can be divided into?

A

Primary
Secondary
Tertiary

54
Q

Define ‘specialisation’.

A

The process wherein a company or individual decides to focus their labour on a specific type of production. When an individual specialises they limit their focus to one specific activity.

55
Q

Define ‘division of labour’.

A

Occurs when workers are assigned specific tasks to do in the workplace, also referred to as specialisation.

56
Q

Adam Smith’s “3 things that make us prosperous, in a general sort of way”

A
  1. Freedom to pursue our own self-interest
  2. Specialisation (division of labour)
  3. Freedom to trade (mobility of capital/labour)
57
Q

Benefits of specialisation

A
  • reduces unit costs
  • improves quality of products
  • can use technology to increase/ improve quality
  • helps labour have a greater understanding of the requirements of production
  • each unit can specialise at what they’re best at
58
Q

Define ‘market’.

A

Any convenient set of arrangements by which buyers and sellers communicate to exchange goods and services.

59
Q

Primary sector industries

A
  • agriculture
  • forestry
  • fishing
  • oil extraction
  • mining
60
Q

Secondary sector industries

A
  • motor manufacturing
  • food processing
  • steel production
61
Q

Tertiary sector industries

A
  • transport
  • sport and leisure
  • financial services
  • education and health
62
Q

Define ‘lean production’.

A

Only producing what is needed even if that means you run out.

63
Q

Define ‘staff turnover’.

A

The number of employees that leave an organisation or workplace whether by the termination of the contract, resignation or any other reason.

64
Q

Reasons for staff turnover

A
  • growth/objectives
  • poor management
  • poor recruitment
  • nature of the job
  • terms of contract
65
Q

Drawbacks of specialisation

A
  • work can become monotonous
  • may be limited by the size of the market
  • not suitable for small firms
  • reduces flexibility of the workforce
  • risk of losing their markets
  • uk economic agents can quickly lose market share
66
Q

Costs of specialisation by other countries

A
  • over-reliance on a limited number of industries
  • risk of structural unemployment
  • threats of external factors
67
Q

Benefits of specialisation by other countries

A
  • greater choice of consumers
  • better quality goods
  • interdependence leading to better relations between countries
68
Q

Money

A

A medium of exchange
A store of value
A unit of account
A standard deferred payment

AQA A Level Economics Theme 1 (1 decks)

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