1.1 (Pg. 7-11) Flashcards
What is scarcity?
We have unlimited wants but limited resources
Why is labour limited?
There are only a number of people and a number of skills.
Why is capital limited?
Capital is limited by technology
What is demand?
The want of goods and services, which is infinite.
What is supply?
The production of goods and services, which is limited.
How do demand and supply work in economics?
The aggregate demand = The aggregate supply.
What is aggregate demand?
The total number of spending on goods and services.
What is aggregate supply?
The total number of output on goods and services.
Define Macroeconomics
Study of aggregate supply and demand.
Define Microeconomics
Study of individual demand and supply of a specific product.
What is the simple philosophy of macroeconomics?
Resources should be used as well as possible.
Can resources be saved in economics?
Some but not all. For example, labour cannot be saved (1 week of the people not going to work is a labour waste not saved).
Why is growth wanted in eco.?
To full-fill more wants.
What is business cycle?
Periods of growth and recession.
What is inflation?
When firms increase price of product due to high demand.
What is recession?
When growth becomes negative for more than 6 months.
Why does recession happen?
Due to low demands, shops start selling less which results in these shops buying less from manufacturers, who produce less.
Define Rate of inflation
Inflation in percentage over 12 months.
Define balance of trade surplus
When exports is more than imports.
Define balance of trade deficit
When imports is more than exports. This can happen due to inflation within the country.
Define demand-side policy.
When government changes the aggregate level of demand through policies.
Define supply-side policy.
When government changes the aggregate level of supply through policies.
Define opportunity cost
Best thing that could have been done as an alternative with the resources.
Define rational choice
Weighing up pros and cons before making a choice.
What is production?
How much an economy produces.
What is consumption?
How much people spend on particular items.
What are the 4 factors of production?
Labour, Land, Capital and Entrepreneurship
