Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > 1.1(real) > Flashcards

1.1(real) Flashcards

1
Q

What is the basic economic problem

A

unlimited wants vs. limited resources (so resources have to be allocated between competing uses)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

why is choice central to the basic economic problem

A

all economic decisions incur and opportunity cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

economics is the study of

A

how society allocates its scarce resources in order to maximise welfare

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Central purpose of economic activity

A

Production of goods and services to satisfy the needs and wants of society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what are economic resources

A

land, labor, capital, entrepreneurship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

definition of labour

A

human resources which contribute to output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What does a PPF show

A

They allow economists to analyse trade offs by showing the maximum combination of two goods or services that can be produced when a fixed number of resources are efficiently used, at a given level of technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Why is the PPF bowed out?

A

increasing opportunity costs and specialization

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

would a fall in unemployment shift a PPF?

A

no, it would move closer to the line. (we are not producing at productive capacity)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

economic good

A

a product which requires resources to produce it and therefore has an opportunity cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are intermediate goods

A

goods used in the production of other goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

why are experiments in econ hard to conduct?

A

economists can rarely conduct experiments and partly because it is often hard to isolate the effects of any particular event.
science experiments have controlled conditions but economic experiments are often uncontrolled

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are final goods

A

finished goods and services produced for the ultimate user

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the 3 basic economic questions?

A
  1. What to produce?
  2. How to produce?
  3. For whom to produce?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

3 economic agents

A
  1. Consumers
  2. Producers
  3. Government
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Buffer stock scheme

A

A scheme intended to stabilise the price of a commodity by purchasing excess supply in periods when supply is high, and selling commodity reserves when supply is low.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Ceteris Paribus

A

all other things held constant. When variables that are not mentioned remain constant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

why do economists build models?

A

Impossibility of undertaking a lab experiment. It summarises the relationships among economic variables. Models are useful because they abstract from the many details in the economy and allow one to focus on the most important economic connections.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

To “think like an economist,” decisions should include:

A

which variables will and will not be studied

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

factors effecting demand

A
  • consumer income
  • consumer tastes
  • substitute, - complements, - expectations, - population and demographic changes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

factors effecting supply

A
  • production costs
  • technological advancements
  • government policies
  • natural disasters/weather conditions
  • changes in expectations
  • government intervention
  • natural resource availability
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

how could worker productivity be improved?

A
  • more training
  • better technology
  • specialisation
  • more experience
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is the public sector

A

government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is the private sector

A

part of the economy involving the private ownership of businesses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

opportunity cost

A

the loss of the next best alternative forgone

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

positive statement

A

can be proven or disproven by data

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

normative statement

A

cannot be tested or validated and may contain a value judgement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

are decisions made by the government normative or positive

A

normative, they make decisions based on their value judgements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Free goods

A

Goods that are unlimited in supply and which therefore have no opportunity cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

example of a free good

A

air

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

economic goods

A

Goods that are scarce because their use has an opportunity cost. They are created from scarce resources and therefore command a price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is allocative efficiency?

A

point on the PPF that maximises social welfare

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

free market economy

A

prices for goods and services are determined by the open market and consumers

35
Q

advantages of a free market? (3)

A
  • economic efficiency,
  • lower prices
  • more choice
36
Q

disadvantages of free market? (3)

A

High consumption of resources, environmental destruction, some will be out-competed,
inequality

37
Q

disadvantages of a free economy? (3)

A
  • what is fair in the free market may not be fair in reality
  • goods we need in society may not be produced if they cannot generate a profit
  • monopolies may arise
  • inequality
  • market failure prevalent
38
Q

market economy

A

an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

39
Q

Advantages of a command economy?

A
  • correct market failure
  • less inequality
  • stop monopoly abuse
40
Q

disadvantages of a command economy? (3)

A
  • less efficient as the government is not a profit maximising entity
  • government may not know what’s best due to asymmetric information
  • choice restriction
  • destroys incentives
41
Q

example of free market economy

A

USA, Hong Kong 1960s

42
Q

Examples of command economy

A

Cuba, North Korea 1980s

43
Q

Examples of mixed economy

A

Germany, United Kingdom

44
Q

Which type of economy did Smith want?

A

‘laissez-faire’ free market, thought that the price mechanism was perfect

45
Q

Which type of economy did Hayek want?

A

Mixed economy

46
Q

Which type of economy did Marx want?

A

command Economy

47
Q

Example of command economy failure?

A

30 million deaths from a famine in China

48
Q

Why did Marx hate the free market?

A

He believed it created prosperity for few and poverty for many. Exploited the proletariat / it would break down because owners of business made huge profits at the expense of workers

49
Q

advantages of mixed economy

A
  • economic efficiency
  • income equality (social welfare programmes)
  • consumer protectionism
  • employment stability
  • provides public goods
49
Q

disadvantages of mixed economy?

A
  • reduced innovation
  • political influence
  • inefficient resource allocation
  • reduced incentives
50
Q

what is economies of scale?

A

when the average cost of producing a good or service falls as the quantity produced increases

51
Q

what does a straight line ppf indicate

A

constant opportunity cost as the two goods use identical factors of production

52
Q

what is a trade-off (PPF)

A

the alternative you face if you decide to do one thing rather than another

53
Q

What is productive efficiency?

A

any point on the PPF curve

54
Q

Who believed in the division of labour

A

Adam Smith
- he observed a pin factory in Glasgow and noted that output increased when workers had their own individual tasks

55
Q

What book did Adam Smith say this in?

A

The Wealth of Nations (1776)

56
Q

division of labour

A

The breaking down of the production process into small parts with each worker allocated to a specific task.

57
Q

3 pros of dividing labour

A
  • each worker is arranged by their expertise, maximising productivity
  • workers only need to be trained in one sector - lower training costs
  • less time wasted switching from task A to task B
58
Q

3 cons of dividing labour

A
  • Specialised workers will struggle to find employment if their job collapses
  • Boredm -> inc absenteeism
  • Countries which over-specialise and deplete their natural resources
  • We become vulnerable to those who are specialised (strikes)
  • if one worker strikes, the whole production process is held at standstill
59
Q

3 pros of specialisation

A
  • increase in productivity due to use of specialist equipment
  • Economies of scale - mass production brings falling long run average costs as unit costs fall
  • helps firms save on training costs as each worker needs to be trained in fewer skills
60
Q

4 cons of specialisation

A
  • boredom (leads to lower productivity and output) - workers at Henry Ford’s Model T production line became so bored that they had to be paid high wages as compensation for the monotony of their work (unit costs may actually increase)
  • workers struggle when unemployed (due to lack of other skills)
  • can increase recruitment costs and absenteeism due to high staff turnover
  • mass-produced goods can reduce consumer variety
61
Q

advantages of division of labour and specialisation on trade

A
  • if they trade these in these goods for goods that they do not produce, it can result in economic growth, more choice, lower prices
62
Q

disadvantages of division of labour and specialisation on trade

A
  • Overdependence on imported goods
  • imports may exceed the value of exports
  • if a country’s goods are not competitive they can suffer
63
Q

3 factors that limit the effectiveness of the division of labour

A

-Size of market
-Type of product
-Transport costs

64
Q

staff turnover

A

the rate at which employees leave a company and are replaced by other people

65
Q

4 functions of money

A
  1. medium of exchange
  2. unit of account
  3. store of value
  4. standard of deferred payment
66
Q

medium of exchange

A

anything that is used to determine value during the exchange of goods and services

67
Q

standard of deferred payment

A

money must be acceptable to make purchases today that will be paid in the future (as there is an assumption that the currency will still hold its value)

68
Q

why is there income inequality in a free market?

A

there is freedom to own resources, those who own resources are more likely to earn more income than others

69
Q

4 characteristics of free market

A

-private ownership of resources
- price determined by competition between firms
- prices determined by supply and demand
- profit motive

70
Q

4 characteristics of command economy

A
  • no profit motive
  • no competition
  • state owned resources
  • goods are allocated by the state
71
Q

4 characteristics of mixed economy

A
  • private ownership
  • state ownership
  • government intervention
  • market-based pricing
72
Q

If they are not public goods, why does the government provide healthcare?

A

because it creates positive externalities

73
Q

Why can the free market not provide public goods?

A

because of the free rider problem

74
Q

what does an increase in the production of capital goods on a PPF indicate?

A

lower living standards

74
Q

How can you shift the PPF

A

increase the quality and quantity of the factors of production

75
Q

factors causing an outward shift in the PPF?

A
  • discovery of new natural resources
  • advances in technology
  • improvements in education and training
  • immigration
76
Q

factors causing an inward shift in the PPF?

A
  • deep recessions
  • natural disasters
  • depletion of natural resources
77
Q

why may a deep recession lead to an inward shift of the PPF

A

deep recessions can lead to reduced investment in research and development, as well as decreased innovation. If technological progress slows down, the efficiency of production processes may decline, contributing to a contraction in the PPF.
labour hysteresis

78
Q

What did Hayek promote instead of government spending

A

private investment

79
Q

advantage of free market economy compared to command economy

A

Competitive markets responsive to consumers (1) no competition in command economies to ensure firms are efficient (1)
* Market prices transmit information between buyers and sellers (1) no need for costly bureaucracy (1)
* Reduces risk of government failure (1) as governments do not know what is demanded (1)

80
Q

definition of productivity

A

output per unit of input

81
Q

factor of production

A

an input used in the production of a good or service

82
Q

does an increase in unemployment shift the PPF inwards

A

NO. just moves to a point inside the PPF

Economics (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions