Brainscape's Knowledge GenomeTM

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


See full index

MICROECONOMICS > 1.1 Scarcity And Choice > Flashcards

1.1 Scarcity And Choice Flashcards

1
Q

Define scarcity

A

A situation that arises because people have unlimited wants in the face of limited resources.

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

What is the fundamental economic problem?

A

Scarcity

Households, firms and governments have to make choices.

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

What is opportunity cost?

A

When making a decision, the value of the next-best alternative is forgone.

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

Define factors of production

A

Resources used in the production process; inputs into production, including land, labour and capital

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

What did US economist Paul Samuelson identify?

A

3 key questions economics set out to investigate:

  • What to produce?
  • How to produce it?
  • For whom to produce it?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define PPC

A

A curve which shows the maximum combinations of goods or services that can be produced in a set period of time given available resources

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

Define economic growth

A

An expansion in the productive capacity of the economy

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

Define GDP

A

Gross Domestic Product

A measure of economic activity carried out in an economy during a period

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

What is happening on any point of the PPC?

A

Society is making full use of all resources

Inside the PPC there is unemployment of some resources.

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

What is the choice for a simple society?

A

To produce either consumer goods or capital goods - to choose between consumption and investment.

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

What happens when society increases stock or capital goods?

A

Productive capacity of the economy increases and we see economic growth.

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

Define division of labour

A

When the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages.

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

What are economic goods?

A

Goods which are subject to scarcity?

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

What are free goods?

A

When there is no scarcity of good e.g. air

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Who make choices in the face of scarcity?

A

Economic agents must make choices.

Households, firms and governments play a role in economic decisions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is economic welfare?

A

The measure of happiness of the population of an economy.

When more needs and wants are satisfied, economic welfare is improved.

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

What is the difference between positive and normative statements?

A

Positive statements can be scientifically proven.
Normative statements are a matter of opinion and value judgement and are difficult to prove.
(Think if it as NORMAL people giving their 2 cents)

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

What is labour?

A

Human effort used in production of goods and services.

- Rewarded by wages.

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

What is land?

A
  • All natural resources including land, minerals, crops and livestock
  • Reward for land is rent.
20
Q

What is capital?

A

Goods that are produced only to assist production eg machinery.
They enable an economy to increase output.
Reward for capital is interest.

21
Q

What is enterprise?

A

Combining the other factors of production to produce goods and services.
Reward is profit which is a motivation to produce goods that satisfy wants in cost effective ways.

22
Q

Define what a market is

A

A place where buyers and sellers meet to exchange goods and services.

23
Q

When does a market economy exist?

A

When the market decides what, how and for whom in production.

24
Q

Benefits of a market economy

A
  • Led by needs and wants
  • Incentive to use resources efficiently bc profit and competition
  • Market reacts quickly and can automatically adjust to needs and wants
  • No admin in operating
25
Q

Weaknesses of a market economy

A
  • Could lead to inequality and NOT maximise economic welfare
  • Could lead to market failure i.e. over provision/ under provision of a good.
  • Doesn’t consider externalities eg noise and pollution
26
Q

How can weaknesses of a market economy be dealt with?

A

Through a mixed economy which uses a market system but governments choose to intervene to prevent market failure.

27
Q

Which economy is where the government decides on the production of goods and services?

A

Planned / command

28
Q

How do you show opportunity cost on a PPC?

A

Movement along the curve. Add equilibriums and show direction of change.

29
Q

Which type of efficiency can be shown on a PPC?

A

Productive efficiency when resources are used to maximise output level.

30
Q

What is economic growth caused by?

A
  • more factors of production (eg new oil discoveries)
  • better quality FOP e.g. training
  • new technology and techniques that improve efficiency
31
Q

Give an example of a long term growth strategy

A

Switching some production from consumer to capital goods.

32
Q

When does specialisation occur?

A

When an individual (firm region or country) concentrated in producing a limited range of products.

33
Q

What is specialisation by individual workers also known as?

A

Division of labour

34
Q

How does division of labour enable more effective production?

A
  • Workers specialise in jobs suited to skill set
  • Same task improves output
  • Workers save time by staying in one place ⏳⏳⏳
35
Q

Are there any disadvantages to division of labour?

A

Boredom which can lead to low output, high absenteeism + poor quality work.

36
Q

What must happen after specialisation?

A

A means of exchange. Bartering isn’t a good system because it requires a double coincidence of wants so money is used instead.

37
Q

What is money 💴 ?

A

Anything widely accepted in exchange for goods and services.

38
Q

Features of money include…

A
  • Acting as a measure of value/ unit of account
  • Store of value ie savings
  • Means if making deferred or delayed payments.
  • Being à medium of exchange
39
Q

What problems could nations find if they overspecialise?

A

If a nation is completely dependant eg on agriculture and then was at war they could be in a vulnerable position.
( a motivation for the establishment of the EU)

40
Q

What do gains from specialisation result in?

A

Different opportunity costs.

41
Q

Define microeconomics.

A

Studies economic decisions taken by individual economic agents or in particular markets

42
Q

Define macroeconomics

A

Studies interactions between economic variables at an aggregate level

43
Q

What is effective demand?

A

Refers to willingness and ability of consumers to purchase goods AT DIFFERENT PRICES.

44
Q

The economic problem has, at its core, the issue of choice because….
A) Our income determines what we can choose
B) Resources are finite
C) As consumers we are free to choose what we want
D) The more we earn the more we can choose

A

B

45
Q 
When making economic decisions, the government is least likely to take account of 
A. The wages in particular industries 
B. How the defence budget is spent 
C. Possible changes in average incomes 
D. The impact on exports
A

A

46
Q

Economic resources are those which…
A) maximise the output of goods in the long term
B) increase economic efficiency
C) are plentiful
D) can contribute to increased production

A

B

47
Q

Providing more and better information to individuals will not necessarily lead to rational decision making. Maybe this is because….
A) individuals are assumed to maximise their own utility
B) individuals can be overloaded with information that they are unable to process
C) individuals are assumed to always act in their own self-interest
D) individuals will not adopt irrational behaviour patterns

A

B

MICROECONOMICS (6 decks)

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