1.1

Question 1

economics definition

Answer 1

study of human behaviour under scarcity

Question 2

positive statement definition

Answer 2

a judgement-free statement which can be tested to be true or false

Question 3

normative statement definition

Answer 3

a statement based on value judgements which cant be tested

Question 4

factors of production acronym and definition

Answer 4

Capital
Enterprise
Labour
Land
elements needed to produce goods/ services

Question 5

opportunity cost definition

Answer 5

the foregone value of the next best alternative (what you miss out on)

Question 6

division of labour definition

Answer 6

assignment of different tasks to different workers to improve productivity

Question 7

adam smiths invisible hand summary

Answer 7

free and competitive markets result in efficiently allocated resources as both parties and selfish and hence both benefit

Question 7

productivity definition

Answer 7

output/ input

Question 7

why specialisation works

Answer 7

repetition develops skills
specific tools become more cost effective
time saved between processes
workers focus on their strengths

Question 8

derived demand definition

Answer 8

demand for a good or service as a result of the demand of something else

Question 9

disadvantages of specialisation (6)

Answer 9

cost of training
higher wages
restricts automation
depletes environment
vulnerable to shocks
reliant on workers

Question 10

advantages of specialisation

Answer 10

more productive, more profit
higher pay for workers as:
- more skilled and knowledge
- more productivity

Question 11

functions of money (4)

Answer 11

medium of exchange
measure of value
store of value (physically retained)
deferred payment (can borrow)

Question 12

characteristics of money (6)

Answer 12

durability
portability
divisibility
difficult to forge
limited supply
acceptability

Question 13

barter definition

Answer 13

trading one good for another, would need a double coincidence of wants

Question 14

command economy definition

Answer 14

where production, investment, prices and incomes are all determined by the government

Question 15

free-market economy definition

Answer 15

resources are allocated through supply and demand

Question 16

mixed economy definition

Answer 16

mix of command and free-market

Question 17

free-markets pros

Answer 17

allocatively efficient, high competition so more investment and employment

Question 18

free-market cons

Answer 18

lot of assumptions, more inequality, volatile market which can fail

Question 19

command economy pros

Answer 19

efficient as planned, more equality and stability

Question 20

command economy cons

Answer 20

lack of growth incentive, restrictive choice, potentially ineffective as information gap

Question 21

productive possibility frontier definition

Answer 21

maximum output of two goods/ services at productive efficiency

Question 22

productive efficiency definition

Answer 22

where all FoP are being fully employed

Question 23

linear PPF

Answer 23

1:1 ratio, constant marginal opportunity cost

Question 24

curved PPF

Answer 24

some FoP are specialised, so opportunity cost increases after turning point

Question 25

PPF efficiency

Answer 25

inefficient inside, efficient on, unattainable currently outside
shifts when FoP changes in quantity or quality

Question 26

intertemporal trade-off

Answer 26

produce consumer or capital goods
consumer means gain today but less future growth
capital means invest (lose gain today) but more future growth