(1.1.1)-(1.1.5)

Question 1

What does economics do/investigate?

Answer 1

Economics investigates how scarce resources are allocated to provide for unlimited wants, it is also a social science so it looks at people’s actions and reactions.

Question 2

What is a positive statement?

Answer 2

not an opinion, it can be tested and proven. E.g. Smart Phone demand increased by 13% in the last 5 years

Question 3

What is a normative statement?

Answer 3

An opinion, usually includes words like SHOULD or COULD. Cannot be tested

Question 4

What are free goods

Answer 4

Products that are not scarce

Question 5

What are Economic goods

Answer 5

Products that are scarce

Question 6

What is a PPF line

Answer 6

PPF shows the different combinations of goods/services which can be produced if all resources are fully and efficiently used. The point of a PPF is to show what we are capable of.

Question 7

What does PPF stand for

Answer 7

Production possibilities frontier

Question 8

Define productive efficiency

Answer 8

Maximized, utilising everything

Question 9

Define allocative efficiency

Answer 9

Not using the most productive point on the PPF, but selecting another point based on preferences

Question 10

Define economic growth

Answer 10

A rise in country’s productive capacity, cause the PPF line to shift outwards.

Question 11

What does the Public sector(/PPF) focus on? (To do with organisations)

Answer 11

The government

Question 12

What does the private sector(/PPF) focus on? (To do with organisations)

Answer 12

Related to markets

Question 13

Define division of labour

Answer 13

Splitting a work force into a series of groups assigned to different functions, which improves its total productivity and allows it to perform more tasks in a smaller amount of time.

Question 14

Define specialisation and what are its advantages?

Answer 14

Instead of one person focusing on many tasks, they specialise in one thing only. Obviously nothing will get done if only one job is fulfilled so this requires more workers. It makes production much more efficient as workers won’t need to learn new skills and instead they can do the one thing that they specialise in.

Question 15

Define production

Answer 15

measure of the value of the output of goods and services e.g. measure by GDP or an index of production in specific industry such as car manufacturing

Question 16

Define productivity

Answer 16

measure of efficiency of factors in production, a measured by output per person employed, or by output per person hour

Question 17

Define demand

Answer 17

Demand for a product is the quantity that purchasers are willing and able to buy at a given price in each time period

Question 18

Define derived demand

Answer 18

The demand for a factor of production that is used to produce another good or service (like buying a phone and then a case, you buying the phone forces you to invest in a case too) - (If the demand for phones increases, so will the demand for cases)

Question 19

Define joint demand

Answer 19

The demand for one product is directly and positively related to the mark demand for a related goods or service. E.g. fish and chips, phones and apps, shoes and polish.

Question 20

Define composite demand

Answer 20

Composite demand is where goods have more than one use

Question 21

Define GIFFEN goods (theory)

Answer 21

If the income dominates the substitution effect the demand curve could be upward sloping (theoretical point)

Question 22

Define the substitution effect

Answer 22

all ways acts in the opposite direction to the price change (shifting the demand)

Question 23

Define the income effect

Answer 23

may operate in either direction (shifting the demand)