1.1 Nature of economics Flashcards
What is a positive economic statement
Statements that can be proved or disproved
What is a normative economics statement
Statements that give a valued judgement
What are the factors of production (C.E.L.L)
Capital, Enterprise, Land and Labour
What is resource scarcity
There are infinity wants but the resources are limited
What is the difference between ‘wants’ and ‘needs’
‘Wants’ are infinite and ‘needs’ are a necessity
What is an example of ‘needs’
Shelter, Food and Water
What is an opportunity cost
The loss of a next best alternative when a different option is chosen
What is division of labour
Breaking down a task into small jobs mangable tasks
What is specialisation
Concentrating on one product or task
What are two advantages of division of labour
-It is more efficient
-Lowers unit costs
What are two disadvantages of division of labour
-Boredom
-Works take less pride in work
-Unrewarding
What are two advantages of specialisation (labour)
-Better Quality
-Lower units costs
What are two disadvantages of specialisation (labour)
-Risk of structural unemployment
-If absent quality can of good can suffer
-Over dependence
What are the advantages of specialisation (Country)
-Always economy to make full use of their resources
-Increases rate of production
What are two disadvantages of specialisation (Country)
-Could lead to over extraction
-Could lead to structural unemployment if good is not need anymore
What are the 4 functions of money
-Medium of exchange
-Store of value
-Measure of value
-Means of deferred payment
What is meant by store of value as a function of money
It enables people to save the money in order to buy things in the future
What is meant by medium of exchange as a function of money
Being able to exchange the money to get a good or service they wish to buy
What is meant by a measure of value as a function of money
Being able to assess the value by comparing it to other prices
What is meant deferred payment as a function of money
Being able to buy a good or service and paying on credit
What is a free market economy
A economy where buying and selling goods and services is not controlled by the government
What is a command economy
a economy where all resources are owned by the government and they allocate it
What is a mixed economy `
An economy that is a mixture of free market economy and command economy
What are two advantages of a free market
-Competition
-Efficient way of allocation scare resources
What are two disadvantages of a free market
-Could lead to a increase in monopolies
-Inequality in resources
What are two advantages of a command economy
-Greater equality of resources
-Full employment
