1.1) nature of economies

Question 1

what is ceteris paribus?

Answer 1

all things being held equal/constant

Question 2

what are positive statements?

Answer 2

Positive statements are objective. They can be tested with factual evidence,
and can consequently be rejected or accepted.

Question 3

what are normative statements?

Answer 3

Normative statements are based on value judgements. These are subjective
and based on opinion rather than factual evidence.

Question 4

what is the basic economic problem?

Answer 4

The basic economic problem is scarcity. Wants are unlimited and resources
are finite, so choices have to be made. Resources have to be used and
distributed optimally.

Question 5

what are the 4 factors of production?

Answer 5

capital, land, labour, enterprise

Question 6

what are renewable resources?

Answer 6

Renewable resources can be replenished, so the stock level of the resources can be
maintained over a period of time

Question 7

what are non renewable resources?

Answer 7

the resource is consumed faster than it is

renewed, the stock of the resource will decline over time.

Question 8

what are capital goods?

Answer 8

Capital goods are goods which can be used to produce other goods, such as
machinery.

Question 9

what are consumer goods?

Answer 9

Consumer goods are goods which cannot be used to produce other goods, such as
clothing.

Question 10

why is specialisation good?

Answer 10

Firms can then take

advantage of increased efficiency and lower average costs of production.

Question 11

what are the three economic agents?

Answer 11

consumers, producers, governments

Question 12

three key questions of economics?

Answer 12

what, how and for whom

Question 13

what is a production possibility frontier?

Answer 13

a curve showing the maximum combinations of goods and services that can be produced in a given period with available resources

Question 14

what occurs to ppf when economy expands?

Answer 14

the curve shifts outwards

Question 15

advantages of division of labour ?

Answer 15

increased productivity, training costs cheapen as they only have to be trained in one section,

Question 16

disadvantages on division of labour?

Answer 16

task may become repetitive and boring, if team becomes overly specialised then they could become inflexible.

Question 17

what is the definition of a market

Answer 17

a set of arrangements that allow transactions to take place.

Question 18

why is money important?

Answer 18

it acts as a medium of exchange and allows a bypass to the double coincidence of wants of trading goods.

Question 19

what are the four key functions of money?

Answer 19

1) medium of exchange
2) stores value over time
3) measure of value of goods
4) method of deferred payments-wages

Question 20

what are the three types of economy’s?

Answer 20

command- state allocates resources - karl marx
free market- price mechanisms allocate resources - Adam smith
mixed economy - government intervention in the free market - john Maynard Keynes

Question 21

define the gross domestic product?

Answer 21

the total value added produced by firms in domestic economy during a period

Question 22

define the opportunity cost?

Answer 22

the value of the next best alternative forgone

Question 23

what happens on the ppf when the economy retracts

Answer 23

the ppf shifts inward

Question 24

what does the shape of a ppf show?

Answer 24

the curve of the ppf shows that opportunity cost is not constant throughout the whole of production

Question 25

if country is operating on the ppf what type of efficiency is that?

Answer 25

productively efficient

Question 26

if the country is operating inside the ppf then what does this mean?

Answer 26

it is not using all factors of production available