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Economics Unit 1 > Chapter 1 and 2 > Flashcards

Chapter 1 and 2 Flashcards

1
Q

Realtive Scarcity

A

The economic problem of having unlimited needs and wants, but limited recourses to meet them

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2
Q

Opportunity cost

A

The best forgone alternative of choosing one option over another

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3
Q

How do opportunity cost and relative scarcity relate?

A

They relate, because as consumers, we must decide where to best put our recourses into.

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4
Q

What are 3 Assumptions of the PPC

A

1) All goods and services are being produced at maximum efficiency
2) Producers can switch production easily and quickly
3) Only 2 goods or services are being produced in an economy

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5
Q

Dynamic Efficiency

A

Where short term and long term focuses are balanced?

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6
Q

Technical Efficiency

A

Where the nations recourses are producing the maximum amount possible

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7
Q

Allocative Efficiency

A

Where a nations recourses are allocated/used in an economy, as to produce the maximum benefits for the consumer

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8
Q

Consumer Sovereignty

A

The economic situation were the needs and wants of consumers determine what is being produced

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9
Q

3 Basic Economic questions

A

1) For Whom to produce
2) How much/ what to produce
3) how to produce

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10
Q

Material living standards

A

Goods or services that raise your standard of living. Strictly tangible items

  • Income
  • Car (luxury)
  • Size of house
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11
Q

Non material living standard

A

Non material (not tangible) things that increase ones standard of living

  • Mental Health
  • Relationship Status
  • Crime rate
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12
Q

Trade offs

A

The total amount of things that must be forgone when choosing one option over the other.
Unlike opportunity cost, as it focuses on all the alternatives, Instead of the best forgone alternative

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13
Q

2 Trade offs on a macroeconomic level

A
  • between economic growth and the environment

- between efficiency and equality

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14
Q

Traditional Viewpoint of Economics

A
  • self interested
  • rational
  • makes perfect decisions
  • ordered preference
  • fully informed
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15
Q

Behavioural viewpoint of economics

A
  • bounded rationality
  • makes good enough decisions
  • reliance on shortcuts and rules of thumb
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16
Q

Economic factors that can influence consumer decision making

A
  • Realtime prices

- Opportunity costs and trade offs

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17
Q

What are Externalities

A

When the consumption of a good or service converses the benefits/harm on a third party or bystander

POSITIVE: getting vaccinated- even though society is not involved, they benefit immensely from the vaccination

NEGATIVE: purchasing palm oil products from unsustainable sources- even though you are not directly killing orangutans, you are contributing to their demise

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18
Q

How does Behavioural economics challenge traditional economics

A

Challenges it, as it argues that people are not perfect. It aims to understand how the ‘average joe’ behaves and spends his money

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19
Q

Overconfidence bias

A

Spending more, I the hopes that you can accumulate that money at a later time

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20
Q

Bounded Rationality

A

Consumers do not always make perfect decisions and are I item by time, energy and patience.

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21
Q

Herd Behaviour

A

Consumers are more likely to purchase a good or service of people around them have the same product
eg. iPhones

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22
Q

Framing

A

People are more likely to purchase a product ir revise if it is presented correctly.
eg. 30% off, vs $3 off

23
Q

Anchoring

A

Consumers are more illy to purchase products if their judgement is influenced by a starting price
eg. Buying a car- the car is the anchor, and purchasing the extras (roadside assistance, premium wipers etc) seem cheap in comparison

24
Q

Status Quo Bias

A

Where consumers will retain the current situation or ‘stays quo’, even if it is not in their best interests
eg- home loan or insurance policy. Due to the amount of paperwork and perceived difficulty of finding another one, People will usually stick with the one they have currently

25
Q

Loss Aversion

A

People ‘feel’ looses more than they do gains

eg- loosing $5 over finding $5

26
Q

Nudge theory

A

Describes the way the government uses subtle hints or approaches to influence consumer behaviour
eg- plain package cigarettes, changing the walk signs to females to promote gender equality

27
Q

Tripe bottom line

A
  • Profit; Economic
  • People; Social
  • Planet; Environmental
    Businesses pacing a focus on these, as meeting them increases their brand image
28
Q

Price discrimination

A

The tactic of charging different amounts for the same product
eg: Cinema tickets- seniors and students are charged less than adults to increase demand

29
Q

Law of demand

A

As the price of a product increases, the quality demanded will decrease.
Inverse Relationship

30
Q

Law of Supply

A

As the price increases, quantity supplied increased

Positive relationship

31
Q

Black market

A

A place where illegal goods or services are sold

eg. Scalping of tickets, illegal weapons, illicit drugs

32
Q

Consumer sentiment

A

The confidence of a consumer of their future economic position, including future employment

33
Q

Elasticity

A

Refers to how responsive the supply and demand is to a change in variable

34
Q

A shift in the graph occurs due to…

A

A NON-PRICE FACTOR

35
Q

A movement in the curve is from a…

A

PRICE OR QUANTITY CHANGE

36
Q

For the supply curve to shift right

A
  • lower costs of labour
  • productivity growth
  • lower taxes/ tariffs
37
Q

For the supply curve to shift to the left

A
  • higher costs of labour or capital
  • slower or negative productivity growth
  • higher taxes or tariffs
38
Q

Disequilibrium occurs when

A

Occurs when the market is in a state of excess demand or excess supply due to price being too high or too low

39
Q

Price mechanism

A

How the forces of supply and demand influence relative prices of goods and services, which then ultimately determines the way recourses are allocated in the economy

40
Q

Relative price

A

The price of a good or service as compared with the price of another good or service

41
Q

What do changes in reactive price do?

A

Changes in relative price send clear signals to producers and consumers and help determine where resources should be allocated

42
Q

An Increase in relative price may mean that…

A

Suppliers invest in substitutes and alternatives

43
Q

Pure monopoly

A
  • ONE firm in the industry
  • brand name and advertising not vital
  • difficulty of entry
  • business is a price maker

YARRA VALLEY WATER

44
Q

Oligopoly

A
  • Several firms in industry
  • advertising and brand name not vital

SUPERMARKETS AND OIL COMPANIES

45
Q

Monopolistic competition

A
  • Quite a few forms in industry
  • brand name and product distinction are important

CLOTHING COMPANIES

46
Q

Perfect Competition

A
  • Many firms in industry
  • ease of entry
  • firms are often small
  • no brand names or advertising
  • firms are price takers

QUEEN VICTORIA MARKET

47
Q

Market Structure

A

Refers to the amount if buyers and sellers in the market, as well as the type

48
Q

Market power

A

Refers to the ability/power of a business to control or manipulate prices

49
Q

Shares

A

Represent part ownership in a company. A public company may release shares In order to raise capital quickly, can be purchased through stock market

50
Q

Bull Market

A

Occurs when the demand and supply for overall shares are strong, and so prices rise to high levels.
DEMAND CURVE SHIFTS RIGHT

51
Q

Bear market

A

The opposite of a Bull Market, where pessimism and negative thoughts lead to an increase in supply and decrease in demand for shares. Causes prices to spiral downwards

52
Q

4 (or 3) factor of production and examples?

A
  • Land/Natural: the natural resources or physical land used in the production. EG: Steel, Iron, Wheat
  • Labour: the manual labour or work needed to produce the service or good. EG: Factory Workers
  • Capital: the machinery involved in the production process. EG: wedding machines at a factory
53
Q

How can a nation measure material and non material living standards?

A

Material: GDP- gross domestic product, which is the monetary figure of all goods and services produced in an economy over a period of time, usually one year
Non Material: GNC- Gross National Happyness, measures the happiness of people In the country, rather than the amount earned or produced. EG: Bhutan

Economics Unit 1 (1 decks)

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