1.2 The Nature And Purpose Of Economic Activity

Question 1

Why are goods and services produced?

Answer 1

To satisfy peoples wants and needs

Question 2

What is a need?

Answer 2

Something people must have and they cannot do without

E.g water and food

Question 3

What is a want?

Answer 3

Something people would like to have but not essential to survive

(Not necessary for survival but nice to have)

E.g books

Question 4

Can something be a want and a need?

Answer 4

Yes: food depending on the type of food

-protein and vitamins are needed

-chocolates are wants

Question 5

Satisfying people’s needs and wants means improving……

Answer 5

Economics welfare

Question 6

What is welfare

Answer 6

Essentially human happiness

Question 7

What can improve economic welfare?

Answer 7

Anything that can make a person happier

Question 8

What are the negatives of short term happiness

Answer 8

Can come at the expense of long term happiness

Question 9

Economic welfare def?

Answer 9

The economic well-being of an individual, a group within society, or an economy

Question 10

What is an economic system?

Answer 10

Set of institutions within a community that decides what , how and for whom to produce

Question 11

How do you define or classify economic systems?

Answer 11

The mechanism(way) through which scarce resources reach the people who eventually consume them .

Question 12

What are the two mechanisms?

Answer 12

-market mechanism
-command mechanism

Question 13

What is a market economy?

Answer 13

Where goods are purchased through the price mechanism in a system of markets

Question 14

What is a command economy?

Answer 14

Gov officials or planners allocate economic resources to firms and other productive enterprises

Question 15

Most economies are what?

Answer 15

Mixed economies

Question 16

What does a mixed economy contain?

Answer 16

-large market sector
-large non-market sector

In which the planning mechanism operates

Question 17

In a pure market economy, what does the price mechanism do?

Answer 17

Allocating scarce resources among competing uses through the markets

Question 18

What makes up the economy itself ?

Answer 18

The markets

Question 19

What can cause markets to break up?

Answer 19

-transport costs and lack of info

Question 20

How can a complete command economy actually exist?

Answer 20

Within a rigid controlled political framework because of the restrictions on individual decision making

Question 21

How is the command economy similar to the market economy?

Answer 21

The price mechanism alone allocates resources

Question 22

What is a price mechanism KEY DEF

Answer 22

The system where the forces of supply and demand determines the price of the commodities

Question 23

When was the UK made into a mixed economy and how did this happen

Answer 23

Post WW2

-1944 Education act extended state provision or education
1948- national health service act did the same for healthcare

Question 24

What did critics of the UK’s mixed economy argue in 1980?

Answer 24

-blamed it for UK’s deteriorating economic performance in comparison to competitors

-argued that public sector was wealth consuming and not wealth creating

Question 25

What have been the main policies the UK have used to get closer to being a free market economy?

Answer 25

-privatisation
-marketisation
-deregulation

Question 26

What are the policies of marketisation, privatisation and deregulation called collectively

Answer 26

Economic liberalisation

Question 27

Wha this privatisation?

Answer 27

-state-owned assets sold to private owners

Question 28

What is marketisation and when does it happen?

Answer 28

-when prices are charged for goods that the state previously provided for free

(Occurs after privatisation)

Question 29

What is deregulation?

Answer 29

Opening up of markets to competition by reducing one or more barriers to entry

(Aims to increase market supply)

Question 30

How can economic systems be defined?

Answer 30

In terms of who owns the means of production