Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

microeconomics > as level > Flashcards

as level Flashcards

1
Q

what is the economic problem?

A

how to allocate scarce resources given that there are unlimited wants

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

factors of production?

A

capital- man made aids to production

land - natural land that can produce goods/resources

labour - human resources (workers)

enterprise- innovative risk takers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

choices to allocate resources

A

what to produce

how to produce

for whom to produce

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is opportunity costs?

A

the cost of the next best alternative (value of what we didnt do)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what ppf shows?

A

maximum production of 2 goods with given factors of production

combinations of 2 goods that can be produced with given factors of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

why is ppf concave

A

represents law of increasing opportunity costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

why is ppf linear

A

constant opportunity costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

on a macro ppf what does below the line mean

A

unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what factor of production fixed in short term?

A

capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

how can shift ppf?

A

increase factors of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is demand?

A

the amount consumers are willing and able to buy at any given price point

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

law of demand

A

inverse relationship between price and quantity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

why demand downslope?

A

income effect- prices go up purchasing power drops

substitution effect- other goods/services prices become more competitive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

factors of demand

A

population- more people to demand shifts right

advertising- good then shifts right

substitute price- sub price increases demand shifts right

income - normal and inferior

fashion- if in fashion demand shift right

interest rates- borrowed money is cheaper so shifts right

compliment price- is complement cheaper shifts right

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

inferior good and normal good

A

inferior - demand drops as income rise (tesco brand food)

normal- demand rises as incomes rise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

law of supply

A

direct relationship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

why supply upwards slope?

A

costs of production ( more profit as price is up)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

factors of supply

A

productivity - more shifts right as cheaper costs

indirect tax - less means cheaper to produce shifts left

number of firms- more firms means more supply

technology- better tech less costs

subsidy- cheaper costs if more

weather- allows more supply (growing stuff)

costs of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is a free market?

A

a market without govt intervention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

equilibrium

A

when demand = supply so no excess ( allocative efficiency)

21
Q

price mechanism

A

eve if free market is not in equilibrium the market self corrects with its forces

22
Q

functions of free market

A

prices…

allocate scarce resources efficiently

ration scarce resources by encouraging or discouraging consumption

signal excess demand/supply and need to adjust allocation of resources

incentivise producers to increase or decrease output for profit max

23
Q

consumer surplus

A

difference between the price consumers are willing and able to pay and how much they do

24
Q

producer surplus

A

the difference between the price producers are willing and able to pay and how much they do pay

25
Q

society surplus

A

CS + PS

26
Q

joint demand

A

product / services that are bought together ( printer and ink)

27
Q

competitive demand

A

substitute goods (coke and pepsi)

28
Q

derived demand

A

when demand for one thing increases demand for its inputs increases

29
Q

composite demand

A

2 goods require the same input so when the production of 1 increases the others supply decreases (cheese and butter )

30
Q

joint supply

A

increase in production for 1 good increases the supply of another (steak and leather)

31
Q

ped formula and values

A

ped = %changeQd / %changeP

ped > 1 elastic
ped < 1 inelastic
ped = 0 perfectly inelastic
ped = 1 unit elastic
ped = infinity perfectly price elastic

32
Q

determinants of ped

A

substitutes (number)
percentage of income
luxury / necessity
Addictive
time period (short run inelastic as cant look for subs)

33
Q

pes equation

A

pes = %changeQs / %changeP

34
Q

determinants of pes

A

production lag ( more means inelastic as longer to react)

stocks (more stock means more elastic as can react to change in price)

spare capacity ( if more then more elastic can react to changes more)

substitutability of FOP (more = more elastic can react)

time( can react better in long run)

35
Q

xed formula

A

%changeQda / %changePb

36
Q

xed figures

A

+ sub
-compliment
xed > 1 strong relation
xed < 1 weak relation
xed = 0 no relation

37
Q

yed formula

A

yed = %changeQd / %changeY

38
Q

yed figures

A

+ Normal good
- inferior good

NORMAL
yed>1 income elastic (normal luxury)
yed< income inelastic (Normal necessity

INFERIOR
>1 income elastic
1<income inelastic

39
Q

business uses of PED

A

pricing decisions to maximise total revenue
prepare for increase in quantity for if elastic

40
Q

business use of PES

A

find ways to make supply price elastic so they can react to changes in price/demand

41
Q

business use of XED

A

pricing decisions such reducing price of first good and decreasing price of the second (reduce printer price increase printer ink price) or price against competitors.

cutting prices may cause price war so may show you to compete non price

if substitute don’t follow your price cut then you must be able to increase output and vice versa

42
Q

business use of YED

A

tells both responsiveness and type of good

plan for booms by knowing the effect of more income

be able to increase output if boom and demand increases

43
Q

limitations of elasticity

A

only ever estimates (sources of the data: surveys competitors and past data)

assumes ceteris paribus ( only one factor effects demand as demand may be effected by all elastticities)

ped varies along demand curve

44
Q

what is allocative efficiency (graphically)

A

allocative efficiency is at the social optimum ( msb = msc )

45
Q

where is the private optimum

A

mpc = mpb

46
Q

social costs (sc)?
private costs (pc)?
private benefits (pb)?
social benefits (sb)?

A
  1. SC = PC + EC
  2. Private costs are the producers costs of production
  3. Private benefit is the benefits of consumption
  4. SB = PB + EB
47
Q

maximisation of society surplus ?

maximisation of net social benefit?

A

demand = supply

MSB = MSC

48
Q
A

microeconomics (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions