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2-Economics- Micro > 1.1- Economic Methodology And The Economic Problem > Flashcards

1.1- Economic Methodology And The Economic Problem Flashcards

1
Q

Basic economic problem

A

There are infinite wants but only limited resources

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2
Q

What are the 4 questions form the basic economic problem

A

-what to produce
-how
-how much
-for whom

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3
Q

Factor rewards

A

Incomes that flow to each of the main factors of production when bought into production use

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4
Q

Factor inputs

A

Land
Labour
Capital
Enterprise

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5
Q

Land as a factor input

A

Natural resources eg. Forests

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6
Q

Factor reward for land

A

Gain rent

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7
Q

Labour as a factor input

A

Human input into production process

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8
Q

Labour as factor reward

A

Gain wages and saleries

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9
Q

Capital as a factor input

A

Things used when making other goods and services
Eg. Machinery

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10
Q

Capital factor reward

A

Gain interest from savings and dividens from shars

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11
Q

Enterprise as factor input

A

Entrepreneurship
innovation

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12
Q

Enterprise factor reward

A

Gain profits

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13
Q

Opportunity cost

A

Benefit lost from the next forgone alternative

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14
Q

Positive statements

A

-objective statements
-can be tested/ammended by lookig at available evidence

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15
Q

Normative statements

A

-subjective statements
-carry value judgements about what ought to be
‘should’ rather than justification
-must economic decisions influenced by value judgements
-vary between diff people

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16
Q

Objective agnts

A

What we assume (when studying economics)

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17
Q

What are the objective agents

A

-rational consumers
-producers/firms
-government

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18
Q

Rational consumers

A

We assume that consumers wish to maximise satisfaction/utility by choosing how to spend their limited money

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19
Q

Producers/firms- objective agents

A

Maximise profits through producing at lower cost

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20
Q

Government objective agents

A

Improve economic/social welfare of citizens

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21
Q

Capital goods

A

-used to make consumer goods and services
-eg. Machinery

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22
Q

Free goods

A

-dont use up any factor inputs when supplied eg. Air
-zero oportunity cost

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23
Q

Consumer goods and services

A

Satisfy our needs and wants directly

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24
Q

Consumer durables

A

Products that provide steady flow of satisfaction

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25
Consumer non-durables
Products used up in act of consumption
26
Consumer services
Eg. Hair cut/ tickets to a show
27
What do ppfs show
Combination of goods that can be made with a given amount of resources
28
As move along ppf curve
Opportunity cost increases
29
Straight ppf curve
Constant opportunity cost
30
Point under ppf curve
Unemployed resources
31
Point over ppf curve
Unattainable- not enough resources
32
Causes of ppf curve shift in
Ppf less -pandemic -war -natural disaster
33
Causes of ppf curve shift out
-improvements in quantity/quality resources -more resources available- eg. Untapped -net migration- from abroad -net investment from abroad- low tax -advancements in technology -improvements in human capital -education and training
34
Economic growth
Increase in the pottential level of real output the economy can produce over a period of time Lras
35
Productive efficiency
For econ as whole- 0occurs when its impossible to produce more of one good without producing less of another For a firm- occurs when av total cost of production is minimised
36
Allocative efficiency
Occurs when the available economic resources are used to produce the combination of g&s that best matches peoples tastes and preferences Doesnt necessarily = optimum society welfare- depends on distribution of income and wealth and value judgements relating to fairness and justice
37
Inter-temporal choice
Choice over time Eg. Whether to leave school get a job or go to uni
38
Scarcity
Results from the fact that people have unlimited wants but resources limited
39
Functions of pricee
Signalling Rationing Incentivising
40
Signallying
Prices send a signal about market conditions- eg house prices increase, prices provide info to businesses and consumers
41
Rationing function of price
Pricies will increase ration scarce resources Eg energy
42
Incentivisng fucntion of price
Prices create incentives to change behavoir High prices will incentivise produceers to increase supply due to higher profits Low prices will incentivise consumers- eg saes0- whilst hgh prices deincentivise
43
Allocative function of prices
Changing relatiive praces allocates scarce resources away from markets exhibiting excess supply and into markets where excess demand
44
Missing market
A situation in which there is no market because the functions of prices have broken down
45
Subsidy
A payment made by gov or other authorty0- usually to producers for each unit of the subsidised good they produce Consumers. May be subsidised eg. Bus passes given to children to enable them to travel on buses free or at a reduced price
46
Indivrect tax
Tax on expendaiture Vat and excise duty- main types in uk Supply shifts left
47
Vat
Value added tax 200% currently Based on price of product0 advalorem tax Price higher, higher vat paid Causes supply curve to diverge- more paid at higher prices
48
Excise duty
Specific unit tax Fixed amount Increase with volume purchase Eg. 2pounds/bottle of wine, reardless of price of wine Levied on petrol, tobacco, alcohol in uk Parallel shift of supply cruve
49
Tax/unit on diagram
Verticle distance two supply curves at same quantity Divide into consumer and producer burden
50
Consumer burden
Amount of tax consumer payys Diff between two equilibrium points on price- Paid before- paid after
51
Producer burden
Amount tax producer pays Tax/unit - consumer burden
52
Total amount of tax received by gov
Tax/unit x new quantity
53
change in producer revenue
Origional revenue- new revenue
54
Incidence of tax
Varied on elasticity
55
Inelastic tax burden
Consumer burden greater Tax revenue more Less impact for demerit ggoods but greater tax rev Can be hypothicated- used for helping to educate dangers of smoking
56
Elastic incidence of tax
Consumer burden when elastic Less tax erevenue More ffective for demerit goods
57
When ped= 0 incidence of tax
Perfectly inelastic Consuemr pass burden Demand x price Upwards line from bottom/demand curve
58
Ped= infinity incidence of tax
Perfectly elastic Producer pays all Dmeand constant Line horizontal
59
Pes= infinity
Perfectly elastic Consumer pay all tax Horizontal line
60
Pes=0 incidence of tax
Perfectly inelastic Supplyl cant change, producer must absorb all taz to stay equilibrium
61
Tehnical progress
New and better ways of making goods and new techniques for producing more output from scarce resources
62
Econ growth
The incrrease in the potential level of real outout the econ can produce over a period of tien
63
Sr growth
Makes use of spare capacity in econ Inside ppf to on ppf
64
Productive efficiency
For the economy- when it is impossible to produce more of one good without producing less of another Firm- av total cost of production is minimised
65
An economic good is
One which has an opp cost
66
What can a ppf not illustrate
Consumer demand
67
The basic econ problem is thaat
Resources have to be allocated between competing uses
68
The objective of econ activity
Satisfy consumer wants
69
Rising unemployment is a price worth paying to get inflation down- an example of
A value judgement
70
The main methodological diff between econ and natural sciences is that economists
Cannot test hyptheses in lab conditions
71
Value judgements inflluence econ decision making and policy because value judgenents
Are eval processess based on individ standards or priorities

2-Economics- Micro (14 decks)

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