aqa economics flashcards for unit 1-4 please
What is the basic economic problem?
Scarcity of resources relative to unlimited wants.
Define opportunity cost.
The value of the next best alternative foregone when a choice is made.
What does the production possibility frontier (PPF) illustrate?
The maximum possible output combinations of two goods that can be produced with available resources.
True or False: A movement along the PPF indicates economic growth.
False.
What is meant by ‘market failure’?
When the allocation of goods and services by a free market is not efficient.
What is a public good?
A good that is non-excludable and non-rivalrous.
Fill in the blank: Demand is defined as the ________ for a good or service at a given price.
quantity consumers are willing and able to buy.
What is the law of demand?
As the price of a good falls, the quantity demanded increases, and vice versa.
Identify one factor that can cause a shift in the demand curve.
Changes in consumer income.
What is supply?
The quantity of a good or service that producers are willing and able to sell at different prices.
True or False: An increase in production costs will shift the supply curve to the right.
False.
What is equilibrium price?
The price at which the quantity demanded equals the quantity supplied.
What happens to equilibrium price when demand increases?
Equilibrium price rises.
Fill in the blank: Elasticity measures the responsiveness of ________ to changes in price.
quantity demanded or supplied.
What is price elasticity of demand (PED)?
A measure of how much the quantity demanded of a good responds to a change in the price of that good.
What does it mean if demand is elastic?
A change in price leads to a proportionally larger change in quantity demanded.
What is consumer surplus?
The difference between what consumers are willing to pay and what they actually pay.
Define producer surplus.
The difference between the price producers receive for a good and the minimum price they are willing to accept.
What is a monopoly?
A market structure where a single seller dominates the market.
True or False: Perfect competition is characterized by many sellers and homogeneous products.
True.
What is the main goal of firms in a capitalist economy?
To maximize profits.
What is GDP?
Gross Domestic Product, the total value of all goods and services produced in a country in a given period.
Fill in the blank: Inflation is defined as a sustained increase in the ________ level of prices.
general.
What is the Consumer Price Index (CPI)?
A measure that examines the weighted average of prices of a basket of consumer goods and services.
What are the two main types of inflation?
Demand-pull inflation and cost-push inflation.
True or False: Deflation is a decrease in the general price level of goods and services.
True.
What is fiscal policy?
Government adjustments to spending and tax rates to influence the economy.
What is monetary policy?
The process by which a central bank manages money supply and interest rates.
Fill in the blank: The main goal of monetary policy is to control ________.
inflation.
What is a budget deficit?
When government spending exceeds its revenues.
What is the role of the Bank of England?
To oversee monetary policy and maintain financial stability in the UK.
Define the term ‘trade balance’.
The difference between the value of a country’s exports and imports.
What is a tariff?
A tax imposed on imported goods.
What is the purpose of a subsidy?
To lower the cost of production for producers and encourage production.
True or False: Exchange rates only affect international trade.
False.
What is a recession?
A significant decline in economic activity across the economy lasting more than a few months.
What does the term ‘unemployment rate’ refer to?
The percentage of the total labor force that is unemployed but actively seeking employment.
What are externalities?
Costs or benefits of a market activity borne by a third party.
What is a negative externality?
An adverse effect experienced by a third party due to an economic transaction.
Define a positive externality.
A beneficial effect experienced by a third party due to an economic transaction.
What is the role of competition in a market economy?
To drive innovation and efficiency, benefiting consumers.
What is a market structure?
The organizational and other characteristics of a market.
Fill in the blank: The four main market structures are perfect competition, monopoly, monopolistic competition, and ________.
oligopoly.
What is the law of diminishing returns?
As more units of a variable input are added to a fixed input, the additional output produced will eventually decrease.
What is the difference between short-run and long-run in economics?
In the short-run, at least one factor of production is fixed; in the long-run, all factors can be varied.
What is the significance of the marginal cost?
The cost of producing one additional unit of a good.
What does the term ‘aggregate demand’ refer to?
The total demand for all goods and services in an economy at a given price level.
What are the components of aggregate demand?
Consumption, investment, government spending, and net exports.
True or False: An increase in interest rates typically reduces consumer spending.
True.
What is the business cycle?
The fluctuations in economic activity that an economy experiences over time.
What are the four phases of the business cycle?
Expansion, peak, contraction, and trough.
Fill in the blank: In a recession, GDP is expected to ________.
decline.
What is a trade deficit?
When a country’s imports exceed its exports.
What is a trade surplus?
When a country’s exports exceed its imports.
Define globalization.
The process by which businesses develop international influence or operate on an international scale.
What is the impact of globalization on local economies?
It can lead to increased competition, access to larger markets, and potential job losses.
What does the term ‘capitalism’ refer to?
An economic system characterized by private ownership of the means of production and their operation for profit.
What is socialism?
An economic system where the means of production are owned and regulated by the state.
True or False: In a capitalist economy, the government has full control over economic activities.
False.
What is the role of the consumer in a market economy?
To drive demand for goods and services through their purchasing decisions.
What is a market economy?
An economic system where supply and demand determine prices and production.
Fill in the blank: In a mixed economy, both the ________ and the private sector play important roles.
government.
What is the significance of the labor market?
It is where workers and employers interact, determining wages and employment levels.
What is structural unemployment?
Unemployment resulting from industrial reorganization, typically due to technological change.
What does ‘underemployment’ mean?
When individuals are working in jobs that do not utilize their skills or abilities.
