1.1 Nature of economics - MICRO Flashcards
What is the economic problem and what does it mean
Scarcity - limited resources but unlimited wants
What’s opportunity cost
next best alternative forgone when a choice is made
What is an outward shift within a PPF caused by
An increase in the quantity or quality of FoP
What type of growth does an outward shift within a PPF show
Potential Growth
What is a movement of an economy within a PPF caused by
Increased production in an economy
What type of growth does a movement within a PPF show
Actual Growth
What happens if there are more consumer goods on the PPF
Means higher standard of living
What happens if there are more capital goods on the PPF
PPF shifts out, increased potential growth
What’s specialisation
When an economic agent focus on producing specific goods
What’s division of labour
When the production process is split into various tasks so workers can specialise
Advantages of div of labour
Lower average costs - output increase
Higher quality output
Worker productivity increase
Disadvantages of div. of labour
Workers become bored
- Productivity falls
- Quality falls
Absenteeism rises
Structural Unemployment
Advantages of specialisation to trade
Disadvantages of specialisation to trade
What are the functions of money + explain
- Money is a medium of exchange
- Intermediary between 2 parties - Store of value
- Can be kept for future use - Unit of account
- Allows to measure value and complain - Standard of deferred payment
- It allows thing to be payed in the future
