1.1 Whiteboard Tasks

Question 1

Define Ceteris Paribus

Answer 1

All other things remain equal

Question 2

Inflation rose from 10% from July 2021 to July 2022
Positive or Normative Statement?

Answer 2

Positive as it can be tested

Question 3

Increasing Interest Rates by 1% will reduce inflation by 2% in the next 12 months
Positive or Normative Statement?

Answer 3

Positive as can be tested

Question 4

The Bank of England should increase Interest Rates to reduce Inflation
Positive or Normative Statement?

Answer 4

Normative as statement

Question 5

Define scarcity

Answer 5

Resources are finite and limited

Question 6

Describe the difference between Renewable and Non-renewable resources

Answer 6

Renewable resources naturally replenish themselves and Non-renewable resources do not replenish themselves

Question 7

Define the economic problem

Answer 7

Unlimited wants and needs and finite resources

Question 8

State the four factors of production

Answer 8

Capital
Enterprise
Labour
Land

Question 9

Draw a straight line PPF

Answer 9

Normal graph with good a on y axis and good b on x axis and a line going down from top of y to bottom of x labelled PPF

Question 10

Where are Productively Inefficient, Productively efficient and Productively unachievable on a PPF

Answer 10

Productively Inefficient= left side of line
Productively efficient= on line
Productively unachievable=right side of line

Question 11

State what would happen if the firm increased its factors of production (on PPF)

Answer 11

The PPF would shift outwards to PPF2 showing an increase in the productive capability of the firm

Question 12

Define capital goods

Answer 12

Man-made products used by firms to produce other capital or consumer goods

Question 13

Define consumer goods

Answer 13

Goods purchased for consumption and not to produce another good

Question 14

Do you think we should produce more capital goods or consumer goods?

Answer 14

The UK has limited factors of production and so therefore we can only produce a certain combination of both

Question 15

Define labour productivity

Answer 15

Output per worker

Question 16

Explain Adam Smith’s Pin Factory Theory

Answer 16

10 workers can produce 10 pins when making the entire pin individually but if they specialise in a small task,they can produce 48,000 pins per day and so the productivity is x50 higher than individual pin makers

Question 17

Identify any advantages and disadvantages of specialisation and the division of labour

Answer 17

Advantages:
-Increased Job expertise
-Increased Productivity
-Capital used more intensively
-Lower unit costs

Disadvantages:
-Repetition lowers morale
-Potentially high labour turnover
-Can be limited by capital
-Can require mass market

Question 18

Explain the law of diminishing marginal returns

Answer 18

When one factor of production is fixed (Capital) increasing a variable factor of production (labour) will increase output up to a point, before output starts to decrease

Question 19

Identify any advantages and disadvantage of specialisation and trade

Answer 19

Advantages:
-Increases productivity
-Greater output for firms
-Access to more goods/services
-Increased quality of life

Disadvantages:
-Creates interpendency
-Reliance for necessities
-Loss of UK industries
-Structural unemployment

Question 20

Identify why firms specialise and trade

Answer 20

UK firms utilise specialisation and the division of labour to maximise their productivity. This creates a large volume of output

Large output will be sold domestically in the UK, but firms will have leftover stock (surplus). Surplus will be sold overseas.

UK firms will specialise in certain good and services for overseas trade. Overseas firms will specialise in certain goods and services for overseas trade.

This will create an interdependency between UK and overseas and so increases risk of external shocks
However, specialisation and division of labour may not be possible without international trade.

Question 21

Identify the four functions of money

Answer 21

-Medium of exchange for goods and services (sale)
-Store of value to buy future good and services
-Unit account to give something a value
-Standard for deferred payment so you can buy something now for in the future

Question 22

Define a free market economy

Answer 22

A type of economic system where the forces of supply and demand are used to allocate scarce resources between alternative uses. No government intervention or little used.

Question 23

Explain any advantages of a free market economy

Answer 23

Advantages:
-Price is good indicator of how to allocate resources
-Competition drives efficiency so lower prices
-Competition drives firms to produce what consumers want
-Competition drives new, innovative goods and services

Question 24

Explain any disadvantages of a free market economy

Answer 24

Disadvantages:
-Income and wealth inequality will increase
-Public parks etc. Won’t be developed/maintained
-Necessities may be underproduced (healthcare,education)
-Dangerous products may be overproduced (alchol,tobacco)
-Lower environmental responsibility increasing pollution

Question 25

Define a command economy

Answer 25

A type of economic system where the state owns and allocates scarce resources between alternative uses

Question 26

Explain any advantages of a Command economy

Answer 26

-Government set wages and all land/property so no inequality
-Necessities like education and healthcare provided for everyone
-Unhealthy/harmful products limited or prohibited

Question 27

Explain any disadvantages of a Command economy

Answer 27

-No price signals to know what to produce
-No profit motive to take risks and innovate
-No profit motive to improve productivity
-No profit motive leading to less choice for consumers

Question 28

Define a mixed economy

Answer 28

-There is both a private sector and a public sector.
-Both will combine to allocate all resources in an economy.
-Governments intervene in Private sector.
-Necessity goods/services provided.
-Price signals allocate most resources
-Combination will mean there is a high Inequality
-Government can control industries in the public interest
-Individuals and firms can still seek high incomes in the private sector

Question 29

Explain the role of the government in a mixed economy

Answer 29

Governments must decide how involved they are. They can… Impact prices, Make les and regulations, Promote competition, run entire industries

Question 30

Define privatisation

Answer 30

Private sector firms take over an industry originally ran by the government. Allowing private sector firms to run the industry with the profit motive

Question 31

Define nationalism

Answer 31

The government take over an industry originally ran by private sector firms. Allowing the government to run the industry in the best interest of the consumers