1.1.1 - 1.1.6 nature of economics

Question 1

use of ceteris paribus assumption

Answer 1

-ceteris paribus to get around problems of multiple variables
-uses relationship between two factors and assume all other factors remain the same

Question 2

decisions many be based on

Answer 2

normative statements
moral views
value judgments

Question 3

positive statement

Answer 3

a statement a that is objective and can be tested

Question 4

normative statement

Answer 4

a statements where in is subjective and can not be tested- contain value judgement

Question 5

economists will

Answer 5

develop theories
create economic models to explain phenomena
simplifying assumptions to limit number of variables
test theories

Question 6

basic economic problem

Answer 6

want are unlimited but resources are finite and scarce

Question 7

four factors of production

Answer 7

capital
enterprise
land
labour

Question 8

land-
labour-
enterprise-

Answer 8

natural resources/physical space
human capital
someone who takes risk

Question 9

goods
services

Answer 9

-physical product you can touch
-in tangible things

Question 10

economic activity

Answer 10

involves combining the factors of production to create outputs that people consume

Question 11

economic agents + incentives

Answer 11

producers- people that make goods/services
consumers- people that but the goods/services
governments- sets rules that others in economy have to follow

Question 12

economic agents and decisions

Answer 12

producers- what to make how much to sell for
consumers- decide what they want to buy and how much to buy for
government- decide how much to intervene in the way prod/cons act

Question 13

opportunity cost def

Answer 13

the cost of the second best alternative forgone

Question 14

problems wish using concept of opportunity cost

Answer 14

-not all alternatives are known
-some factors don’t have alternative uses
- lack of info on alternatives
-some factors can be hard to switch to an alternative use

Question 15

ppf shows

Answer 15

the maximum possible output, the options that are available when you consider the production of just two types of good/services

Question 16

trade off

Answer 16

when you choose between conflicting objectives because you can’t achieve all your objectives as the same time

Question 17

factors that show economic growth shift ppf to the right

Answer 17

-improved factors of production
-improved allocation of resources
-improved efficiency/productivity

Question 18

economic growth decreased shift to the left ppf

Answer 18

-natural disasters
-civil war
-emigration
-decline in productivity/efficiency
-decrease in resources
-not improved factors of productions

Question 19

what shift a along curve of ppf

Answer 19

price

Question 20

capital and consumers goods

Answer 20

capital- goods that producers other goods
consumer- goods that do not produce other goods

Question 21

division of labour

Answer 21

type of specialisation where production is split in to different tasks and specific people are allocated to each task

Question 22

advantages of specialisation

Answer 22

improve quality/quantity
achieve economies of scale
improved efficiency
training cost reduced

Question 23

disadvantages of specialisation

Answer 23

repetitive tasks/ increased boredom
less productive less efficient
increased structural unemployment
lack of flexibility

Question 24

barter systems

Answer 24

swapping goods with other countries is one way a country can get what it needs

Question 25

disadvantage of barter system

Answer 25

in efficient because it tasks a lot of time and effort to find traders to barter with

Question 26

function of money

Answer 26

measure of value store of value standard of deferred payment (money can be payed at a later date)

Question 27

adam smith

Answer 27

believed in free market by invisible hand would allocate resources in society’s best interests

Question 28

karl marx

Answer 28

believed in command economy he believed that profit maximising producers would exploit workers

Question 29

freidriech hayek

Answer 29

believed in mixed economy be believed gov shouldn’t intervene to allocate resources because gov lacked info to allocate the beneficially

Question 30

free market

Answer 30

market where resources allocate by forces of supply and demand by invisible hand w on gov intervention

Question 31

command economy

Answer 31

economy where scarce resources allocated by the government to where they think there is greater need

Question 32

mixed economy

Answer 32

economy where resources allocated by forces of supply and demand but gov has limited intervention by implementing laws and public goods

Question 33

pros of free economy

Answer 33

choices for consumers efficiency entrepreneurship

Question 34

disadvantage of free economy

Answer 34

inequality- diff in income no profitable good may not be made overconsumption of demerit goods monopolies abuse

Question 35

pros of command economy

Answer 35

maximise welfare- prevent inequality low unemployment prevent monopolies

Question 36

cons of command economy

Answer 36

poor decision making by lack of info means gov makes poor decisions restricted choice for consumers lack of risk taking + efficiency

Question 37

gov economic objectives

Answer 37

high economic growth high employment equilibrium in bops low inflation (2%)

Question 38

how economy formed

Answer 38

factors of production are inputs and produce outputs in the forms of goods and services

Question 39

monopolies def

Answer 39

those who exploit market by charging higher prices