A level economics

Question 1

What are the steps to create an hypothesis?

Answer 1

1. step is to make an observation.
2. step is to form an hypothesis, which is a possible explanation for our observation.
3. step is make a prediction using our hypothesis.
4. step is to test the prediction by testing the hypothesis and if it survives these and is supported by the evidence then the economists support the evidence then it becomes a theory

Question 2

What is the difference between positive and normative statements?

Answer 2

positive statements can be tested, are fact based and also objective(not influenced by personal beliefs. Whereas normative statements are based on valued judgments(meaning based on opinions) and cannot be tested.

Question 3

Role in policy Making

Answer 3

When an individual receives a positive statement they then form a normative statement based on the facts presented , however this is only an valued judgment.

Question 4

Non-Renewable Resources

Answer 4

Non- renewable resources are resources that will not be replenished examples of these are fossil fuels:
Coal, Oil and natural gas.

Question 5

Renewable resources

Answer 5

renewable resources are resources that can be replenished, meaning they wont run out, examples of these include:
Sunlight, waves and wind.

Question 6

The economic problem

Answer 6

The economic problem is that human wants are infinite, but there are a finite amount of resources (scarce resources) this is also called the scarcity problem

Question 7

Opportunity costs

Answer 7

Is the benefit given up, for the next best alternative, meaning if your thinking of going to university not is it the costs that you have to look at but also the time your going to give up for university. You could be starting a business or travel the world.

Question 8

What is an economy

Answer 8

An economy is a system that tries to solve the scarcity problem, or the problems economies face.

Question 9

What must we ask ourselves when allocating resources?

Answer 9

What to allocate the resources on, how to allocate the resources, and for whom

Question 10

Factors of production and why money is not a factor of production?

Answer 10

Land - such as fish, salt, oil to be used in a bakery(anything that can be gained from land)
labour- the people you hire to work at your company
capital - which are the things you use to make the product e.g. machines or robots
CEO - the person who organises what the company does and the person who also allows the product to be made.

The reason why money isn’t a factor of production is because money is used to buy the resources needed for production but isn’t actually used to produce a product.

Question 11

Production possibility frontier (PPF)

Answer 11

PPF shows us the total combination of two goods we can produce, while still using our resources efficiently.

Question 12

What is PPF

Answer 12

A PPF graph can show how effective we are at using our resources when trying to find the total combinations of two goods we can produce.

Question 13

What does it mean if we are outside the graph?

Answer 13

We could not possibly produce any goods outside of the line since we have limited resources to do so.

Question 14

What does it mean if we are inside the line?

Answer 14

Even though we can still produce the product, we are not using our resources efficiently so it would be productively inefficient.

Question 15

What does it mean if we are right on the line?

Answer 15

we are productively efficient, meaning we are using our limited resources efficiently to produce the total combination of our two products.

Question 16

What is a characteristic of a PPF graph ?

Answer 16

It always has a constant opportunity cost.

Question 17

Increasing opportunity cost

Answer 17

Opportunity costs increase between a PPF graph between two goods.
For example, if we want more of product A than B we would divert a percentage of resources from the production of B which leads to a percentage decrease of production of B but an percentage increase for the production of A.

Question 18

what is Allocative efficiency?

Answer 18

We can only maximise an economies welfare by looking at the needs and wants of that economy, between the two goods in production. This is called allocative efficiency when an economies welfare is maximised

Question 19

What is productivity efficiency?

Answer 19

When an economy is producing along the points of its PPF, it means we are using all of our resources at their full potential.