1.1 Demand Flashcards
What is the problem with all economies at the moment?
due to scarcity, governments have to allocate resources carefully, making decisions about how they should be produced and distributed.
What is scarcity?
Limited availability of economic resources for society’s unlimited demand.
What are the economic resources?
the materials we use to produce goods and services.
What is land? and give an example.
Natural resources. e.g. fields for farmers.
What is labour? and give an example.
Human resources e.g. tractor drivers
What is capital? and give an example.
goods that produce other goods e.g. tractor
What is enterprise? and give an example.
Land, labour and capital e.g. farm business
How does labour get paid?
A wage (monthly) or a salary (weekly)
How does land get paid?
Rent
How does capital get paid?
Interest.
What do countries need to decide?
What to produce? consumer demand
How to produce it? firms and profit
And for whom? who can afford it
What is opportunity cost?
Cost of next best alternative
What is command economy?
Economy controlled by government.
What is free market economy?
Controlled by market.
What kind of economy is the UK?
UK is a combination of both.
What is the law of demand?
As price increases, quantity demanded decreases. Ceteris paribus.
What is ceteris paribus?
All else being equal.
What is the relationship between price and quantity?
Negative relationship.
If there is a change in quantity demanded what will happen?
It will move along the curve.
If there is a change in demand?
The curve shifts.
What are the factors that shift the demand curve?
ICI PASTE
Income
Complements
Interest
Population
Adverts
Substitutes
Tastes
Expectations
What is PPF?
Product Possibility Frontier = a curve showing the maximum output for two products and combinations of these products that can be produced with existing resources.
What are the assumptions with the PPF?
Only a specific time period.
Technology is unchanged.
Total available resources remain the same
all resources are effectively used.
On PPF what does point A mean?
We have right number of resources to satisfy demand.
On PPF what does point D mean?
We don’t have enough resources.
On PPF what does point X mean?
We aren’t using enough resources.
What is PPC?
Another name for PPF = A way of showing combination of two goods that can be produced with a set amount of resources.
On a flat PPC what does point A show?
Producing efficiently.
On a flat PPC what does point D show?
Currently unobtainable (scarcity)
On a flat PPC what does point X show?
Not maximising potential.
What is elasticity?
Straight line = gradient is constant = elastic relationship
What is inelasticity?
Curve = Gradient is inconsistent = inelastic relationship.
What is choice for economies on the PPF curve?
A country/firm must decide that if they want more of one thing they need less of the other.
If the point D at the centre of the PPC curve…
The opportunity cost is smaller because distance between Q and origin is smaller.
If the points B and C represent…
The opportunity cost is large because distance between Q/P and origin is larger.
What is supply?
The amount of goods that are available to consumers.
Producers and firms aim to profit maximise.
What is demand?
a consumer’s desire to purchase good at a given price.
Consumers who aim to utility maximise.
What is consumer surplus?
Consumer is willing to pay higher than market price.
If there is a lot of quantity the price is…
Low
If there is little quantity the price is…
High
What is sustainability?
Meeting the economic goals of today without compromising the economic goals of the future.
What are Free Goods?
Goods with no opportunity cost, and no scarcity e..g sunlight.
What is positive economics?
Something that can be demonstrated or proven and is based on facts.
What is normative economics?
Something that can be debatable based on opinion and cannot be proven.
What is the market?
a place where parties can meet to fulfil a transaction.
Markets establish the prices of goods and services that are determined by supply and demand.
What is the price mechanism?
he means by which decisions of consumers and businesses interact to determine the allocation of resources.
What is consumer surplus?
when the price consumers pay for a product or service is less than the price they’re willing to pay.
What is producer surplus?
the total amount that a producer benefits from producing and selling a quantity of a good at the market price
Four types of economic Goods
Land, Labour, Capital, Enterprise.
What is Equilibrium?
a point where demand and supply are balanced which is the optimal state for the market.
What is current account?
The flow of funds from trade in goods and services, including other income flows and transfers.
