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Economics > 1.1 Nature of economics > Flashcards

1.1 Nature of economics Flashcards

1
Q

Why do economists use models?

A

To develop theories on behaviour

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2
Q

What are economic models usually based on?

A

Assumptions

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3
Q

What does ‘ceteris paribus’ mean?

A

‘Other things being equal’

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4
Q

As economics is a social science, what is impossible and why?

A

For laboratory experiments to be conducted because many variables are always changing

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5
Q

What is a positive statement?

A

A statement which is based on facts that can be proved

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6
Q

What is a normative statement?

A

A statement which is based on value judgements and are subjective

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7
Q

Why are value judgements important?

A

They help influence economic decision making and policy

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8
Q

What is the problem of scarcity?

A

Wants are unlimited and resources are limited, so resources have to be allocated/ distributed optimally

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9
Q

What are the 4 factors of production? (4)

A

Capital
Entrepreneurship
Land
Labour

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10
Q

What is a renewable resource?

A

A resource which can be replenished

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11
Q

What is an example of a renewable resource?

A

Oxygen, solar power

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12
Q

What is a Non-renewable resource?

A

A resource which cannot be replenished

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13
Q

What is an example of a Non-renewable resource?

A

Oil, gas

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14
Q

What is the importance of opportunity costs to consumers?

A

Deciding on what goods to buy

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15
Q

What is the importance of opportunity costs to producers?

A

Deciding on whether to hire more employees or to buy another machine

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16
Q

What is the importance of opportunity costs to government?

A

Deciding whether to spend on NHS or education

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17
Q

What do production possibility frontiers depict? (2)

A

The maximum productive potential of an economy
They show the opportunity cost of producing 2 goods

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18
Q

How could you show a maximum productive potential of an economy using a PPF curve?

A

Anything lying on the PPF curve

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19
Q

How could you show opportunity cost using a PPF curve?

A

Any points on a PPF curve and comparing the output

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20
Q

How could you show economic growth using a PPF curve?

A

An outwards shift of the curve

21
Q

How could you show economic decline using a PPF curve?

A

An inward shift of the curve

22
Q

How could you show an inefficient allocation of resources using a PPF curve?

A

A point under the PPF curve

23
Q

How could you show unobtainable production using a PPF curve?

A

A point above the PPF curve

24
Q

What are PPF curves draw assuming? (2)

A

A fixed amount of resources are used
There’s a constant state of technology

25
Q

What are movements along the PPF curve due to?

A

Changes of output

26
Q

What are shifts of the PPF curve due to?

A

Changes in resources

27
Q

What are capital goods?

A

They are goods which can be used to produce other goods

28
Q

What are consumer goods?

A

They are goods which cannot be used to produce other goods

29
Q

What is specialisation?

A

When workers each complete specific tasks

30
Q

With regards to advantages of using specialisation, what is something that can be achieved?

A

Economies of scale

31
Q

With regards to advantages of using specialisation, more competition leads to what? (2)

A

Firms have to lower costs and therefore lower prices as well

32
Q

With regards to advantages of using specialisation, what variety of goods can be produced?

A

A greater variety of goods can be produced

33
Q

With regards to advantages of using specialisation, what level of output can be achieved? and why?

A

A higher level of output can be achieved, because workers do what they are good at

34
Q

With regards to disadvantages of using specialisation, Why do workers loose motivation to work?

A

Because work becomes repetitive

35
Q

With regards to disadvantages of using specialisation, why does structural unemployment increase?

A

Because skills are not transferable

36
Q

With regards to disadvantages of using specialisation, what variety of goods are produced?

A

Less variety of goods are produced

37
Q

With regards to disadvantages of using specialisation, why do workers leave their job?

A

Because they become dissatisfied

38
Q

What are the 4 functions of money? (4)

A

A medium of exchange
A measure of value
A store of value
Method of deferred payment

39
Q

Who is associated with free market economies?

A

Adam smith

40
Q

Who is associated with mixed economies?

A

Hayek

41
Q

Who is associated with command economies?

A

Karl Marx

42
Q

What is a free market economy?

A

An economy where resources are allocated by private firms and individuals

43
Q

What is a mixed economy?

A

Where both the government and the market forces of supply and demand allocate resources

44
Q

What is a command economy?

A

Where the government allocates all resources

45
Q

What is the role of the government in a mixed economy?

A

To provide public goods

46
Q

What are advantages of a free market economy? (3)

A

Firms are efficient
Personal freedom
More choice

47
Q

What are disadvantages of a free market economy? (4)

A

More inequality
No welfare payments
Abuse of monopoly power
Public goods are not/under provided

48
Q

What are advantages of a command economy? (2)

A

Less inequality in society
Prevents abuse of monopoly power

49
Q

What are disadvantages of a command economy? (4)

A

Resources may not be allocated properly
Less choice
Less personal freedom
Less democracy

Economics (6 decks)

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