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A Level Economics > 4.1.1 Economic Methodology And The Economic Problem > Flashcards

4.1.1 Economic Methodology And The Economic Problem Flashcards

1
Q

Social science

A

Study societies and the human interactions within those societies
Human interactions are complex and are influenced by many variables

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2
Q

How do economists understand certain interactions

A

Economists build models
All models make a range of assumptions

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3
Q

Difference between positive and normative statement

A

A positive statement is one that can establish hypotheses and empirically tested. In contrasts a normative statement is instead based on opinion and subjective values

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4
Q

Examples of positive economic statements

A

Unemployment rate in India falling
Increasing the minimum wage last year in the UK has resulted in improvements to wage inequality
Prices of oil have dramatically risen

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5
Q

What are normative economic statements often an example of

A

Basis of manifestos of political parties

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6
Q

Examples of normative economic statements include

A

Every economy should aim to provide free healthcare for citizens
Corporation taxes in an economy should be higher than personal income taxes
The best way to deal with crime is to employ more police

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7
Q

Value judgements

A

The belief of individuals and societies about what is right ad wrong

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8
Q

What do value judgements do

A

Influence governments choices with regards to the economic policies they choose to adopt and send money on

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9
Q

What is individual decision-making influenced by

A

Positive outcomes and the morality of choices

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10
Q

What are positive outcomes focussed on

A

Self and not ‘the benefit of society’

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11
Q

Moral judgements

A

Normative concept, the right things means different things to different people

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12
Q

What do consumers have different moral judgements on

A

Equity and equality

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13
Q

Equity

A

Concerned with the idea of fairness

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14
Q

Examples on how moral judgement is different for government policies

A

Some countries believe that it is fair for all citizens to be able to access healthcare, irrespective of their ability to pay, where as other countries believe that no pay, no access is fair

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15
Q

Equality

A

Concerned with everyone being equal and having equal

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16
Q

What type of concept is equality

A

Normative

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17
Q

Central purpose of economic activity

A

The production of goods and services to satisfy needs and wants

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18
Q

Needs

A

Are essential for survival eg. Food and shelter

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19
Q

Wants

A

The desires for goods and services that are not essential eg. Electronics

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20
Q

What is wrong with the demand for needs and wants

A

The demand for needs and wants is infinite while the supply of resources needed to produce them is finite

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21
Q

Finite

A

There is a limited amount available and it will at some point run out

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22
Q

Goods

A

Physical products such as bicycles or T-shirts

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23
Q

Services

A

Non-physical items such as hairdressing, tourism or manicures

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24
Q

What is the ultimate goal of firms

A

To create products that meet the needs and preferences of customers and provide value to them

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25
What happens to businesses when they meet customer needs
Business can build customer loyalty, increase brand awareness and generate revenue
26
Third purpose of business activity
To add value to products and services
27
Adding value
Is the difference between the price that is charged to the customer and the cost of inputs required to Crete the product or service
28
What can value added features do
Differentiate products from competitors, create a unique selling point and increase customer satisfaction
29
Unique selling point
The elements that make one business products better than those of competitors
30
Differentiate
Making a product different from other similar products through the use of unique features and branding
31
Example of how differentiated product can create a competitive advantage for businesses
A product that is easier to use, has a better design or is of higher quality than competitors
32
Scarcity
The demand for a good or service is greater than the availability of a good or service
33
3 important economic questions
What to produce? How to produce? Who is to benefit?
34
What to produc
As resources are limited in supply, decisions carry an opportunity cost What should be produced a better rail service or more public hospitals
35
How to produce it
Would it be better for the economy to have labour-intensive production so that more people are employed, or should goods/services be produced using machinery
36
Price mechanism
The interaction of demand and supply in a free market and the means by which scarce resources are allocated between competing wants and needs
37
3 main economic systems
Free market, a mixed economy, a planned economy
38
Mixed economy
A blend of free market and planned economy as individual, firms ands the government own factors of production and distribute goods and services
39
Planned economy
An economy in which all the resources are owned by state and the government controls the distribution of goods/services
40
What and how to produce? For whom? Free market system
What-demand and supply How-most efficient profitable way For- those who can ford it
41
What/hows to produce? For whom? Mixed system
What-demand, supply, the government How- some efficiency but also focus on welfare For- those who can afford it, plus some provision to those who cannot afford it
42
hat/how to produce? For whom? Planned system
What-the government How- ensure everyone has a job For whom- everyone
43
Factors of production
Land, labour, capital and enterprise
44
Land
Non man-made natural resources available for production
45
Labour
The human input into the production process
46
Capital
Any man-made resource that is used to produce goods and services
47
Enterprise
Involves taking risks in setting up or running a firm
48
Free market economic system
A market economy with no government intervention
49
Factors market
A market where factor of production and bought and sold
50
Sustainability
Meeting the needs of current generation without compromising the needs of future generations
51
Problem with overconsumption
Current generations over consume and produce, resulting in resources becoming scarce which means they are being destroyed for future generations
52
Factors of production
Land, labour, capital, enterprise
53
Basic economic problem
Resources are scarce
54
How scarcity affects consumers
In a free market scarcity has a direct influence on prices The scarcer the resource r product, the higher the price consumers will pay
55
How scarcity affects producers
Producers selling products made from scarce resources will find their costs of production are higher than if they were selling products made from more abundant resources
56
How scarcity can affect workers
Workers may want a more comfortable and safer working environment but their employers may not have the resources to create it
57
How scarcity affects the government
Governments have to decide if they will provide certain goods/services or if they will allow private firms to provide them instead Their decision influences the allocation of resources in society
58
Opportunity cost
the loss of the next best alternative when making a decision
59
Example of opportunity cost
When a consumer chooses to purchase a new phone, they may be unable to purchase new jeans. The jeans represent the loss of the next best alternative (the opportunity cost)
60
Production possibility curve
is an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production to produce only two goods/services
61
Allocative efficiency
Makes the best possible use of scarce resources to produce the combinations of goods and services that are optimal for society, thus minimising resource waste
62
How can you use production possibility curve to show economic growth or decline
Outward shift of entire curve- economic growth Inward shift- economic decline
63
Example of how a factor of production can be improved
the impact of training and education on labour. An educated workforce is a more productive workforce and the production possibilities increase
64
When does economic decline occur
when there is any impact on an economy that reduces the quantity or quality of the available factors of production
65
Example of economic decline
Japanese tsunami of 2011 devastated the production possibilities of Japan for many years. It shifted their PPC inward, resulting in economic decline

A Level Economics (3 decks)

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