4.1.1

Question 1

define positive statement

Answer 1

can be tested/measured against facts

Question 2

define normative statement

Answer 2

involves value judgement/opinion

can be political or moral

Question 3

what’s the BEP for every country?

Answer 3

• what to produce? -> how many?
• how to produce it?
• who gets the output?
  diff. societies address these in diff. ways

Question 4

describe centrally planned economy

Answer 4

central authority creates 5 year plan
usually left/totalitarian/dictatorship govts.
e.g. N. Korea

Question 5

describe mixed economy

Answer 5

mix of planned and market economy
some output made by state -> e.g. health, education
some privatisation + some public
e.g. UK

Question 6

describe market economy

Answer 6

resources made for rich -> privately owned + traded
effective demand
but some can’t afford goods
e.g. Singapore

Question 7

define effective demand

Answer 7

people want goods and can afford to pay for them and get output

Question 8

what are the factors of production and their incomes?

Answer 8

land (natural resources) -> RENT
labout -> WAGE/SALARY
capital -> (machinery/buildings) -> INTEREST
enterprise (combine resources for output) -> PROFIT

Question 9

why is the environment an example of land for factors of production?

Answer 9

it’s scarce

Question 10

define opportunity cost

Answer 10

the benefits foregone of the next best alternative

Question 11

define finite

Answer 11

not enough supply

will run out

Question 12

what do PPFs show?

Answer 12

combination of 2 goods/services that could be made with finite resources
(axis show quantity)

Question 13

what shape are PPFs usually? why?

Answer 13

concave to origin

resources are more efficient at producing 1 good than another

Question 14

what’s the central purpose of economic activity?

Answer 14

the satisfaction of needs and wants

Question 15

what do features of the BEP include?

Answer 15

trade-offs

conflicting objectives

Question 16

what does the existence of scarcity imply?

Answer 16

individuals must make choices

Question 17

what’s the main economic objective of firms in a market economy likely to be?

Answer 17

maximisation of profits

Question 18

what does an economy do in basic terms?

Answer 18

convert inputs/resources into output

Question 19

what is money?

Answer 19

a means of measuring and comparing the value of both resources and output
(not a factor of production in its own right)

Question 20

define non-renewable

Answer 20

fixed supply
once used up there’ll be none left
unsustainable
e.g. fossil fuels, wood, fish stocks

Question 21

define renewable

Answer 21

use of the resource doesn’t reduce amount available in future
can be replenished in a sustainable way -> reforestation

Question 22

why can sustainable economic activity be seen as limiting?

Answer 22

reduces production and consumption in short run

Question 23

why is unsustainable economic activity bad?

Answer 23

reduces options for future generations

Question 24

define inter-generational inequality

Answer 24

people currently enjoy a standard of living that could threaten the well-being of future gens.

Question 25

define a need

Answer 25

necessary for human survival
food, water, shelter, clothing
unlimited

Question 26

define a want

Answer 26

items we don’t need but make human existence more satisfying

unlimited

Question 27

what does productivity measure?

Answer 27

output relative to inputs

Question 28

what does an increase in quantity and/or quality of factors of production (economic growth) cause to a PPF?

Answer 28

shifts PPF outwards

e.g. technological improvements

Question 29

define allocative efficiency

Answer 29

find out what an economy wants to find the best point at which to allocate diff. combinations of output levels and resources

Question 30

do free goods incur opportunity cost?

Answer 30

no

Question 31

what do consumers aim to do?

Answer 31

maximise utility/satisfaction

Question 32

what do workers aim to do?

Answer 32

maximise wages/other benefits

Question 33

what do firms aim to do?

Answer 33

maximise profits

Question 34

what are goods with opportunity cost called?

Answer 34

scarce/economic goods

Question 35

define scarcity

Answer 35

insufficient resources to supply consumers with what they want

Question 36

what’s a shortage?

Answer 36

demand for a product exceeds supply of it

Question 37

what does it mean if the PPF is linear/a straight line

Answer 37

opportunity cost is constant