1.1 Nature of Econ

Question 1

1.1.1
define ceteris paribus

Answer 1

ceteris paribus is the challenge of holding all other variables constant in an effort to isolate what is driving change.

Question 2

Define Economics

Answer 2

social science studying how scarce recourses are allocated among unlimited wants and human satisfactions

Question 3

Define MicroEconomics

Answer 3

single factors, effects of an individuals choices

Question 4

1.1.3 A
scarcity

Answer 4

unlimited wants but limited recourses happens due to society not having enough

Question 5

factors of production

Answer 5

capital - assets—physical tools, that allow for increased work productivity example machinery / software, hardware
enterprise - an organisational unit producing goods or services that has choice in decision-making
land - elements in creating goods and services eg - sea , farmland
labour - work people do to produce goods and services

Question 6

what choices are needed to be made in a society due to scarcity

Answer 6

what to produce
how to produce
whom to produce for?

Question 7

1.1,3 B
The distinction between renewable and non-renewable
resources

Answer 7

renewable resources can naturally replenish themselves while nonrenewable resources cannot

Question 8

1.1.3 C
What is Opportunity cost and why is it important?

Answer 8

The next best alternative forgone when choosing one “thing” over another
eg: producing more x will lead to fall in production of y if you have the a limited recourse like labour

Question 9

economic goods vs free goods

Answer 9

econ - scarce so opp cost
free - not scares so no opp cost (air)

Question 10

1.1.4 A
what does a ppf(production possibility frontier) show?

Answer 10

shows output combination of two good when ALL RESORCES ARE FULL AND EFFIENCETY EMPLOYED
(check notes for diagram #1)

Question 11

concave pff shows

Answer 11

diminishing marginal returns
more and more units of a commodity are sacrificed to gain an additional unit of another commodity increasing at a constant

Question 12

1.1.4 B
attainable and unattainable ppf
what does data below the curve show
what does data along the curve show
what does data above the curve show

Answer 12

below happens due to waste unemployment and inefficiency
along is max efficiency - these are both attenable
above is unattainable with current resources
(check notes for diagram #2)

Question 13

attainable and unattainable ppf - opp cost
below to along
along on the curve

Answer 13

no opp cost
opp cost
(check notes for diagram #2)

Question 14

1.1.4 A
economic growth long run

Answer 14

ppf SHIFTS outwards
happens due to more labour / capital available or technological improvements (CELL)
(check notes for diagram #3)

Question 15

What happens if increase in capital but only for one side of the ppf

Answer 15

(check notes for diagram #5)

Question 16

economic growth short run

Answer 16

below the curve has unemployment and moving towards the curve unemployment falls
this is growth within so no shift as using unused resources
(check notes for diagram #4)

Question 17

how to increase production without growth

Answer 17

reallocating production

Question 18

Linear ppf measuring the opp cost

Answer 18

gradient
example - -1800/600 = -3
therefore o/c is 1 x per 3 y
(check notes for diagram #6)

Question 19

1.1.4 C
The distinction between capital and consumer goods

Answer 19

capital goods make consumer goods and services eg - machinery / software, hardware
consumer goods satisfy our needs
consumer durables - steady flow - phones
consumer non durables - coffee
consumer services - haircut

Question 20

1.1.5 A
specialisation

Answer 20

specialisation occurs when economic units concentrate on producing a specific good or service
economic unit - individual , firm . state
helps increase productivity and scarcity

Question 21

divisor of labour

Answer 21

adam smith
workers are doing specific tasks
leads to inc eff and performance

Question 22

1.1.5 B
The advantages and disadvantages of specialisation and
the division of labour in organising production

Answer 22

+ve) higher wages , more eff production
-ve) one person not doing their job can effect others ,
tedium , missing working can have large effects as people cant do the same job as eff , high chance if absence as work can be monotonous , low demand of good means less profit.

Question 23

1.1.5 C
benefits and cost of specialisation trade

Answer 23

ben
allow for trade
improved national income
choice for consumer
better quality goods
cost
over reliance on others
risk of unemployment
threat from external factors (weather, natural disasters)
less developed countries discourages to join new industries

Question 24

1.1.6 A
What are the type of economies and give an explanation of them

Answer 24

1)free market economy - limited government indeed government protects rights
2) planned or command economy - scares resources are owned by the government, the state allocated the recourses. how? who for ? how much?
3) mixed economy - some resources owned by state, some private.

Question 25

1.1.6 B
advantages and disadvantages of a free market

Answer 25

A) Choice – if enough demand there will be
supply. Market

equilibrium – allows markets to operate at their equilibrium. This maximizes both consumer and producer surplus

D) Profit maximization – The main objective of firms is to profit maximise. Therefore, without state allocation of resources consumers may have to pay high prices and suffer from lower quality goods

Monopolies –
if an economies has a lack of competition . This will lead to higher prices and lower qualities as firms don’t need to be efficient

Question 26

1.1.6 B
advantages and disadvantages of panned or command economy

Answer 26

A) Prevention of monopolies – As the state allocates all resources it mitigates the risk of monopolies being created.

More equal society – state allocates acts in society’s best interest, maximizing social welfare rather than to maximize profit.

D) Inefficient allocation of resources – The main disadvantage of a command economy is due to the fact that they lack a profit motive. Cost will be higher

Question 27

1.1.6 C
The role of the state in a mixed economy

Answer 27

state corrects market failure, supplies public , quasi public and merit goods.

quasi - can be priv and public for example a hospital
merit - education - goods that are considered to be benefits to a individual