Autumn First Half Term

Question 0

Command or planned economy

Answer 0

Economic system where government allocates resources in society

Question 1

Basic economic problem

Answer 1

Resources have to be allocated between competing uses because wants are infinite whilst resources are scarce

Question 2

Free market economy

Answer 2

Economic system which allocates resources through market mechanism

Question 3

Mixed ecomony

Answer 3

Both the free market mechanism and the government plannig process allocate resources

Question 4

Factors of production

Answer 4

Inputs to the production process ( land, labour, capital, entrepreneurship)

Question 5

Consumer surplus

Answer 5

Difference between how much buyers are prepared to pay for a good and what they actually pay

Question 6

Producer surplus

Answer 6

Difference between price sellers receive and how much they need to remain in the market

Question 7

Inferior good

Answer 7

Demand falls when incomes increase

Question 8

Normal good

Answer 8

Demand increases when incomes increase

Question 9

Joint supply

Answer 9

When two or more goods are produced together

Question 10

Price / market mechanism

Answer 10

Prices respond to changes in demand and supply for a product which has a signalling/ rationing affect and moves market to a new equilibrium

Question 11

Normative statement

Answer 11

Value judgement

Question 12

Positive statement

Answer 12

Can be supported or refuted by evidence

Question 13

Opportunity cost

Answer 13

Benefits forgone of next best alternative

Question 14

Production Possibility Frontier

Answer 14

Curve which shows maximum potential level of output with all resources fully and efficiently employed

Question 15

Specialisation

Answer 15

System of organisation where economic units such as households or nations are not self sufficient but concentrate on producing certain goods and services and trading surplus with others

Question 16

Subsidy

Answer 16

Grant given by government to encourage production of good/ service

Question 17

Scarcity

Answer 17

Inefficient resources to meet all demands

Question 18

Investment

Answer 18

If a society wishes to expand its stock of capital goods to produce more in the future , it must sacrifice present consumption

Question 19

Gains from specialisation

Answer 19

1) Higher output - total production increases & quality is improved
2) Variety- consumers have access to a greater variety & higher quality products
3) bigger market- specialisation and global trade increase size of market offering opportunities for economies of scale
Competition& lower prices- increased competition acts as incentive to minimise costs , keep prices down & maintains low inflation

Question 20

Division of labour

Answer 20

When production is broken down into many separate tasks
Raises output per person as people become proficient through constant repetition
G in in productivity lowers cost per unit and ought to lead to lower prices for consumers

Question 21

Limitations of division of Labour (4)

Answer 21

1) Unrewarding repetitive work that requires little skill lowers motivation and hits productivity. Workers have less pride in work and quality suffered. Dissatisfied workers = less punctual & rate of absenteeism increases
2) choose to move to less boring jobs - high worker turnover ( highest in retailing, catering, hotels)
3) some workers receive little training and may be unable to find alternative jobs - structural unemployment
4) mass produces standardised goods - lack variety for consumers

Question 22

Specialisation of highly developed countries

Answer 22

Comparative advantage is shifting towards specialising in high value - technology manufactured goods and high -knoledge services

Question 23

Factors affecting demand

Answer 23

Price
Other prices : complements & substitutes
Income
Preferences

Question 24

Factors affecting supply

Answer 24

Cost of production
Other prices - substitutes & joint supply
Tax & subsidy
Expectations of future

Question 25

What does scarcity force consumers to do?

Answer 25

Which goods & services to consume

Which commodities to prioritise

Question 26

What does scarcity force producers?

Answer 26

What to produce
How to produce
For whom to produce

Question 27

Capital goods

Answer 27

Goods that are produced in order to be used as inputs into the production process ( factories, machinery)

Question 28

Consumer goods

Answer 28

Goods that are produced to satisfy consumption demands of the present

Question 29

Why does PPF shift?

Answer 29

Economy produces more capital goods
Increases productive capacity
More resources available for production

Question 30

Potential economic growth

Answer 30

Expansion in productive capacity of economy

Question 31

Why does PPF stretch?

Answer 31

Technological improvements

Question 32

Answering supported choice questions

Answer 32

1) define key terms
2) explain why answer is correct
3) explain why different answer cannot be correct
4) real world example
5) annotate diagram

Question 33

Absolute advantage

Answer 33

Ability to produce good more efficiently than any other producer

Question 34

Comparative advantage

Answer 34

Ability to produce good with lower opportunity cost than any other producer

Question 35

Demand

Answer 35

The quantity of a good/ service consumer chooses to by at any possible price in a given period

Question 36

Law of demand

Answer 36

There is an inverse relationship between the quality demanded and he price of a good/ service

Question 37

Veblen effect

Answer 37

When price increases demand increases in snob goods

Question 38

Short in demand curve

Answer 38

Change in niece of the factors that influenced

Question 39

Movement along demand curve

Answer 39

Price falls so demand increases

Question 40

Demand curve shifts outwards (3)

Answer 40

Increase in incomes : more disposable income; more people are able to buy goods at given price
Increase in price of substitute : people switch
Decrease in price of complementary : more people buy good that goes hand in hand

Question 41

Demand curve shifts inwards (3)

Answer 41

Recession : less disposable income; fewer people are able to buy good at given price
Decrease in price of substitute: people switch
Increase of complementary price: fewer people buy good that goes hand in hand

Question 42

Movement along supply curve

Answer 42

Price falls so firms find it less profitable to supply good and so reduce supply

Question 43

Supply curve shifts outwards (5)

Answer 43

1) Production costs are lower - cost of factors of production is lower so firms increase supply of good as profit margin is larger
2) New technology - more cost effective so profit margin is larger
3) Subsidies : reduce costs
4) joint supply price increases : firm produces more of both
5) supply substitution price decreases : firms may have resources to supply multiple products , SS price decreases so profit margin decreases and firm produces more of original product

Question 44

Supply curve shifts inwards (4)

Answer 44

1) Production costs higher - costs of factors of production increases
2) taxes: paid to government so profit margin decreases so firms prepared to supply less output at given market price
3) joint supply price decreases: firm produces less of both
4) supply substitution price increases: firms decide how much to supply based on expected future prices ; firms allow stocks of non- perishable goods to build up if higher prices are expected ; may hold back current supply to increase future profitablity ( important ifor goods which take few years to get ready e.g. Trees & palm oil