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EPA > Chapter 1 - 10 Principles Of Economics > Flashcards

Chapter 1 - 10 Principles Of Economics Flashcards

1
Q

Name the 3 scarce resources.

A
  1. Land
  2. Labour
  3. Capital
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2
Q

Define: Land.

A

“All the natural resources on earth.”

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3
Q

Define: Labour.

A

“The human effort - both mental and physical that goes into the production,”

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4
Q

Define: Capital.

A

“The equipment and structures used to produce goods and services.”

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5
Q

Define: Scarcity.

A

“The limited nature of society’s resources.”

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6
Q

Define: Economics.

A

“The study of how society manages its scarce resources.”

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7
Q

Define: The Economy.

A

“All the production and exchange activities that take place everyday.”

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8
Q

Define: Economic activity.

A

“How much buying and selling goes on in the economy over a period of time.”

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9
Q

Define: Microeconomics.

A

“The study of how households and firms make decisions and how they interact in markets.”

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10
Q

Define: Macroeconomics.

A

“The study of economic-wide phenomena, including inflation, unemployment and economic growth.”

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11
Q

Define: Economic growth.

A

“The increase in the amount of goods and services in an economy over a period of time.”

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12
Q

What are the 10 principles of economics?

A
  1. Trade offs
  2. Opportunity cost
  3. Marginal changes
  4. Incentives
  5. Specialisation
  6. Market economy
  7. Government intervention
  8. Standard of living & GDP
  9. Quantitative Easing & Inflation
  10. Phillips Curve
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13
Q

Explain the difference between ‘Efficiency’ and ‘Equity’.

A

Efficiency = Getting the most out of your resources.

Equity = Distributing economic prosperity fairly among the members of society.

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14
Q

Define: Opportunity cost.

A

“The value of the next best alternative foregone.”

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15
Q

Define: Marginal changes.

A

“Small incremental adjustments to a plan of action.”

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16
Q

How to make a rational decision?

A

You see which option has more marginal benefits vs. marginal costs.

17
Q

Give an example of an incentive.

A

Petrol tax would incentivise people to buy more fuel efficient cars or take public transport.

18
Q

Why is International trade good for countries?

A

Because it allows specialisation between the nations.

19
Q

Define: Market economy.

A

“Allocation of resources through the decentralised decisions of firms and households as they interact in the markets for goods and services.”

20
Q

Define: Invisible Hand

A

“The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically.”

21
Q

What did Adam Smith say in the ‘Wealth of Nations’?

A

“By pursuing his own interest, he (the economic agent) frequently promoted that of society more effectually than when he really intends to promote it.”

22
Q

Why do Governments intervene in the markets?

A

To promote Efficiency and Equity.

23
Q

What is Market Failure?

A

“When scarce resources are not allocated to their most efficient use.”

24
Q

Define: Externality.

A

“The cost or benefit of one person’s decision on the well-being of a third party, which the decision maker does not take into account.”

25
Q

What is ‘Market Power’?

A

“The ability of a single economic agent to have a substantial influence on market prices.”

26
Q

Define: GDP per capita.

A

“The market value of all goods and services produced within the economy in a given period of time divided by the population of the country.”

27
Q

What is the current GDP and GDP per capita and GDP growth in UK?

A

GDP = $2.85 trillion
GDP per capita = $43,800 (2015)
GDP Growth = +2.2% (2016)

28
Q

Define: Standard of living.

A

“The amount of goods and services that can be purchased by the population of a country.”

29
Q

Define: productivity.

A

“The quality of goods and services produced from each hour of a worker or factor of production’s time.”

30
Q

What is the recent number of QE that the UK decided to launch and what is it trying to achieve?

A

£60Billion.

The government planned on buying gov. bonds to force down their yields and force the investors to make other (more riskier) investments and therefore five boost to the economy.

31
Q

Define: inflation.

A

“An increase in the overall level of prices in the economy.”

32
Q

What is the Phillips Curve?

A

“a supposed inverse relationship between the level of unemployment and the rate of inflation.”

33
Q

What is the ‘Business Cycle’?

A

“Fluctuations in economic activity such as employment and production.”

EPA (4 decks)

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