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Economics IGCSE > A - Market System > Flashcards

A - Market System Flashcards

1
Q

Market

A

Where buyers and sellers communicate and exchange goods and services for money

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2
Q

Functions of market system

A
  1. Price determination

2. Resource allocation

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3
Q

Demand

A

Amount of good BOUGHT at given prices over period of time

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4
Q

Supply

A

Amount of good supplied at given prices over period of time

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5
Q

Demand schedule

A

Amount of good DEMANDED at different prices in a table

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6
Q

Demand curve

A

Demand schedule plotted on graph

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7
Q

Correlation of price and Qd

A

Inversely related / negatively correlated

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8
Q

Factors affecting demand (6)

A

SCAIPT

Substitutes, Complements, Advertising, Income, Population, Tastes and fashion

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9
Q

Types of goods (based on income)

A

Normal
Inferior
Luxury

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10
Q

Population demographics (4)

A

Age, gender, geography, ethnicity

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11
Q

Factors affecting supply

A

SCNPTT

Subsidies, (production) Cost, Natural conditions, Prices of other goods, Technology, (indirect) Taxes

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12
Q

Movement vs shift of curve

A

Movement - affected by price

Shift - affected by many factors

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13
Q

Equilibrium price

A

When demand and supply equal

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14
Q

Change in equilibrium price and quantity after change in supply and demand

A

Supply decreases - E price increases, quantity decreases

Demand decreases - E price decreases, quantity decreases

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15
Q

Total revenue

A

Amount of money generated from sale of output

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16
Q

Price elasticity of demand

A

Responsiveness of demand to change in price

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17
Q

Inelastic D - definition, slope, value of elasticity

A

Change in demand small in proportion to change in price; steep slope; negative with number < 1

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18
Q

Elastic D - definition, slope, value of elasticity

A

Change in demand large in proportion to change in price; flat slope; negative and number > 1

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19
Q

Factors affecting price elasticity of demand

A

(SIN)

proportion of Income, degree of Necessity, number of Substitutes

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20
Q

Perfectly (in)elastic

A

P inelastic - vertical line - demand never changes

P elastic - horizontal line - price elasticity infinite

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21
Q

Price elasticity of supply

A

Responsiveness of supply to change in price

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22
Q

Inelastic S - definition, slope, value of elasticity

A

Change in supply small in proportion to change in price; steep upwards slope; positive and less than 1

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23
Q

Factors affecting PES

A

TIME (SPS)

Stock levels, Production speed, Spare capacity

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24
Q

Value of inelastic vs elastic IED

A

Inelastic - between 1 and -1

Elastic - >1 or

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25
Q

Normal vs inferior goods for IED

A

Normal - positive IED

Inferior - negative IED

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26
Q

Factors affecting IED

A

Necessities vs luxuries

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27
Q

Effect of price cuts on demand (in)elastic goods

A

D Inelastic - decreases total revenue

D elastic - increases total revenue

28
Q

Effect on price increases on D (in)elastic goods

A

D Inelastic - price increases increase revenue

D elastic - price increases decrease revenue

29
Q

Effects of IED on firms

A

Firms want to switch to products that have high IED eg. toys when people can richer

30
Q

Effects of price elasticity on government

A

Governments impose taxes on price inelastic goods so consumers cannot avoid them

31
Q

Scarcity

A

Finite resources, infinite needs and wants

32
Q

Basic economic problems

A

What / how / for whom to produce?

33
Q

Production possibility curve

A
  1. How a country’s resources can be allocated to producing different combinations of two goods
  2. Shape of quadrant
34
Q

Definition of economy

A

System attempting to solve the basic economic problems

35
Q

Types of economies

A

Market - market forces and private businesses
Planned - government
Mixed - private and public

36
Q

Mixed economies in solving what to produce

A

Private - only produce what consumers want

Public - provides under-provided goods eg. Edu / health

37
Q

Mixed economies in solving how to produce

A

Private - maximise quality, minimise cost

Public - government decides

38
Q

Mixed economies in solving for whom to produce

A

Private - who can afford

Public - free, paid by taxes

39
Q

Define efficiency

A
  1. Minimise cost 2. Minimise resources 3. Only needed goods produced
40
Q

How public sector ensures efficiency

A

Sets government targets / asks private corporations to provide services

41
Q

How private sector ensures efficiency

A

Competition & survival only for those with quality goods at fair prices

42
Q

Instances of market failure

A

NMLM

Negative externalities, missing markets, lack of competition, merit goods

43
Q

Role of public sector

A
  1. Provide under-provided or non-provided goods
  2. Competition
  3. Penalise those imposing costs
44
Q

Labour

A

People available for work

45
Q

Division of labour definition

A
  1. Break production process into small steps
  2. Each worker given role
  3. Concentrate on best role
46
Q

Advantages of division of labour to firms

A

Productivity

  1. Efficiency - workers expert and use of specialist machines
  2. Production time decreases
  3. Organisation and structure easier
47
Q

Advantages of division of labour for workers

A
  1. Employment - experts
  2. Job satisfaction, promotion prospects
  3. Higher pay
48
Q

Disadvantages of specialisation to firms

A
  1. Productivity low - boring jobs
  2. Lack flexibility - rigid roles
  3. Inefficient - process stopped by one
49
Q

Disadvantages of division of labour on workers

A
  1. Demoralised

2. Unemployment - automation or specialised skill not required

50
Q

Wage rate and equilibrium wage

A

Determined by supply and demand of labour

- equilibrium - supply and demand for labour equal

51
Q

Factors affecting demand for labour

A

DLSC

Demand for goods, Labour productivity, Substitutes, other Costs

52
Q

Factors affecting supply of labour

A

FAM

Females, Age (retirement, school-leave), Migrants

53
Q

Reasons for wage difference

A
  1. Skills, training, qualifications required different
  2. Dangerous and dirty
  3. Trade unions
  4. Expanding industries
54
Q

Quality of labour characteristics

A
  1. Increase productivity
  2. Invest w training and edu
  3. Favour literate, numerate, communicators
55
Q

Define minimum wage

A

Gov interference; companies not paying below minimum hourly wage

56
Q

Minimum wage benefits

A
  1. In poverty
  2. Disadvantaged workers
  3. Businesses - more motivation
57
Q

Negative externality of minimum wage

A

Set above equilibrium - reduce employment

58
Q

Trade unions’ roles

A
  1. Negotiate w businesses
  2. Benefits eg. Strike wage
  3. Government legislate
  4. Solve legal disputes
59
Q

Effects of trade unions

A
  1. Pressurise businesses w threats
  2. Increase wage
  3. Unemployment
60
Q

Ways to avoid job losses from high wage

A
  1. Increase labour productivity
  2. Charge consumers more
  3. Cut profit margin
61
Q

Production

A

Process of converting resources into goods and services

62
Q

Four factors of production

A

Land, labour, capital, entrepreneurship

63
Q

Role of entrepreneurs

A
  1. Organisers
  2. Risk-takers
  3. Business idea
  4. Owner
64
Q

Labour or capital intensive

A

Labour > capital or opposite (services vs manufacturing)

65
Q

Characteristics of productivity

A
  1. Output per unit input
  2. Effectiveness
  3. Lower costs, higher profits
66
Q

Primary sector 4 categories

A

Extracting raw materials

  1. Fishing
  2. Agricultural
  3. Mining and quarrying
  4. Forestry
67
Q

Secondary sector definition

A

Converting raw materials into semi-finished or finished goods

Economics IGCSE (1 decks)

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