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Micro economics y12 > Choices > Flashcards

Choices Flashcards

1
Q

What is the basic economics problem?

A

There are infinite wants and finite resources

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2
Q

Define economic good

A

A good that has some scarcity and value and a benefit to society

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3
Q

Define free good

A

A good with no opportunity cost or scarcity

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4
Q

What are the factors of production and what are their rewards?

A

Land earns rent
Labour earns wages
Capital earns interest
Enterprise earns profit

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5
Q

What are the economic agents?

A

Households
Businesses
Governements

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6
Q

Define needs and wants with example

A

Needs : Good or services that are required e.g food

Wants: Good or services that arent necessary e.g tv

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7
Q

Define factors of production

A

the resources required in order to produce goods and services

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8
Q

What is the governemts role as an economic agent?

A

To ensure that households and businesses havew a safe, stable and fair environment in which to operate

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9
Q

What are businesses role as economic agents?

A

To provide goods and services needed to enable households to meet needs and wants

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10
Q

What is a normative statement? and what is the key word in a normative statement

A

SUbjective statementd based on opinions and judgements . They carry value judgement and often contain the word ‘should’

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11
Q

What is an informative statement? and what is the key word used in an informative statament

A

Objective statements that can be tested, amended or rejected by using evidence . Key word used is ‘ will’

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12
Q

What are the three economic sectors?

A

Private
Public
Voluntary

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13
Q

What are the three economic systems?

A

Free market
Centrally planned
Mixed economy

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14
Q

Why do private sector businesses operate?

A

To make a profit

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15
Q

Who set up private sector businesses?

A

Entrepreneurs

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16
Q

What is an entrepreneur?

A

Someone who sets up a business taking a financial risk in hope to make a profit

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17
Q

Why do public sector business operate?

A

To provide goods/services that arent suitable to be provided by private sector

18
Q

Why are certain business in the public sector and give eg?

A

Unprofitable in private sector e.g street lighting

Are too important to be left to private sector e.g NHS and schools

19
Q

Why dont we have a private army?

A

it wouldnt be possible to make people pay and only protect cewrtain people

20
Q

Define opportunity cost

A

the next best opportunity (thing) forgone

Chosing one thing inevitablty means giving up something else

21
Q

What happens in a centrally planned economy and give eg of one

A

The government controls most business e.g china

22
Q

What happens in a free market economy?

A

Private sector dominates business and the government try and stay out of things e.g Australia

23
Q

Define exchange

A

The process by which goods and services are traded

24
Q

Define specialisation

A

The concerntration by worker/s, firm, region or whole economy on a narrow range of goods and services

25
Q

What does specialisation lead to and why?

A

Greater productivity , increased production , increasd output , increased quality , improved efficiency
Why? Dividing the production allows workers to focus on one aspect of making a procuct rather than doing verything so they can dedicate themselves to do that one task better than anything

26
Q

Who is Adam Smith and why is he famous?

A

The guy on £20 notes

He came up with the theory of the division of labour (specialization) and the invisible hand

27
Q

What is the invisible hand?

A

The theory that individuals operating in a free economy make decisions focused on their own self-interest, logically taking actions that result in benefiting society as a whole even though such beneficial results were not the specific focus or intent of the individuals actions

28
Q

What is a production possibility curve?

A

An illustration of the trade offs facing an economy that produces only 2 goods

29
Q

What is a production possibility frontier?

A

An illustration of the trade offs facing an economy that produces only 2 goods

30
Q

What does a production possibility frontier show?

A

The maximun quantity of one good that can be produced for any given production of the other

31
Q

Describe a trade off

A

When you have to choose between two conflicting objectives because you cant achaivbe all your objectives at the same time

32
Q

What is ceteris paribus and how can it be used when evaluating a price increase and its effect on demand

A

Everything else being equal
E.g if the price of X increases, ceteris paribus, people will purchase less of X. Ceteris Paribus means that when considering the price change, we wont consider any other variables that may affect it such as the price of other substitutes rising more than the price of X

33
Q

Give an example of successful specialisation in our history

A

In early societies, men would be the hunters, women and children would prepare the food and collect berries. The idea was that it was a very simple division of labour to enable the best use of different skill sets.

34
Q

Negatives of specialisation

A

It gets repetitive and boring doing the same job day after day which could lead to low employee morale
Low morale = lose motivation = lose concerntration = make mistakes
Assembily line can fail + stop if one stage if problem in one of the stages

35
Q

What is a capital good?

A

A good used in the production of another good

36
Q

What is a consumer good?

A

One ready to be purchased and used by consumers

37
Q

Where is a trade off demonstrated on a PPF?

A

Moving along the curve from one point to another means allocating more resources to the production of one thing and fewer to another which results in a trade off between the two options

38
Q

What does it mean if a letter doesnt lie on the PPF curve? - inside and outside

A

Outside the line : It isnt acheivable using the current level of resources. Extra resources are needed
Inside the line: The mix of goods is productively inneficient . You could do more of one thing without compromising the other

39
Q

What does it mean when all points are on the PPF curve?

A

Productively efficient . All resources are used as efficiently as possible to produce the maximum output.

40
Q

What causes a shift in the PPF?

A

Economic growth

Micro economics y12 (1 decks)

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