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Economics > econ final year 10 > Flashcards

econ final year 10 Flashcards

1
Q

what are factor rewards

A

payments different factors of production require to recieve in order to participate in productive activity.

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2
Q

what is the factor rewards owners of land often require and who do they get it from. give an example

A

owners of land usually require payment of rent to supply resources to firms
eg- for the purpose of farming or extraction of oil

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3
Q

what factor rewards do people who supply labour get

A

people will supply labour to firms in return for payments called wages

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4
Q

list 2 factors which affect wages

A

the area where a person works and what work they do

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5
Q

what factor rewards do banks get

A

banks give loans to firms for various purposes like investment in capital goods which is expensive and then the money lent is charged with interest.

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6
Q

what factor rewards do firms get

A

profit is the reward for undertaking risk.

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7
Q

what is profit

A

if a firm earns more revenue than costs, there is a surplus left called profit.

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8
Q

what is a loss

A

if a firms costs are more than its revenue then it is called a loss

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9
Q

what is factor mobility

A

factor mobility refers to the ease with which resources or factors of production can be moved from one productive activity to another without incurring significant costs or loss of output.

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10
Q

what are the 2 types of factor mobility

A

occupational mobility, geographic mobility

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11
Q

define occupational mobility

A

this refers to the ability to move factors between different productive tasks. this can be between different firms in the same industry or between different industries

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12
Q

give an example of occupational mobility between different firms in the same industry and an example between different industries

A

different firms- selling equipment from one manufacturer to another

different industries- a worker moving from a car manufacturer to a clothing manufacturer

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13
Q

what is geographic mobility

A

the ability to move factors of production to different locations

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14
Q

give an example of geo. mobility

A

when labour moves between different countries

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15
Q

why is labour immobile (2 points)

A
  • many workers are geographically mobile, because many workers do not like to move away from their families to new job locations.
  • many workers have specialized skills and may not be able to learn new skills due to reasons such as age and expenses.
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16
Q

why is geo. immobility prominent in developed nations

A
  • moving houses can be expensive
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17
Q

why are many natural and human made resources immobile

A

because they cannot be used in different production activities so if they have no other use, they create a wastage of resources.

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18
Q

why is land as a resource geographically immobile with example

A

this is because land in most cases cannot be moved physically to a new geographic location without significant costs. for example, certain areas have fertile land suitable for crops while some dont.

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19
Q

why is capital geographically mobile with example (2 points)

A

this is because most capital goods are easy to transport. for example, tools and equipment can be transported in ships.

a lot tools and equipment like axes can be used for different purposes.

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20
Q

how can labour be mobile

A

by investing in different skills which can be used in different areas.

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21
Q

how can factor quantity of labour be increased (3 points)

A
  • increase wages
  • increase in population of working age
  • improvements in healthcare will help people live longer and reduce the amount of days people are absent due to sickness
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22
Q

how can labour factor quality be increased

A

training and education can improve skills of the worker as well as the amount and range of goods and services they can produce.

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23
Q

how can factor quantity of capital be increased (2 points)

A

increased production of capital goods by producers

increase in interest payments will increase the amount of capital, investors are willing to supply

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24
Q

how can capital quality be increased

A

advances in technology improve speed and accuracy of modern equipment

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25
Q

how can enterprise quantity be increased (2 points)

A
  • an increase in prices consumers are willing to pay for goods and services may encourage more people to start firms
  • a rise in unemployment and a fall in no. of paid jobs may result in more people starting businesses
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26
Q

how can enterprise quality be increased (2 points)

A
  • more and better training courses on entrepreneurship

- more and better support for new entrepreneurs.

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27
Q

what is an economy

A

an economy is an area where there is production and exchange of goods and services

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28
Q

what is production

A

using inputs (resources) to make outputs (goods and services) to satisfy the needs and wants of consumers.

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29
Q

what is consumption

A

the use of goods and services to satisfy human needs and wants

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30
Q

what is exchange

A

the purchase of goods and services by an entity not produced by it.

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31
Q

what is exchanged in a modern economy

A

money for goods and services

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32
Q

what are the 4 fop

A

land, enterprise, labour, capital

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33
Q

define land

A

land refers to all the natural resources on our planet

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34
Q

define labour

A

the physical and mental effort provided by people to design, make and sell economic goods and services.

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35
Q

define enterprise

A

the ability to organize production in a firm.

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36
Q

define capital

A

all the human made resources used to produce goods and services

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37
Q

who are entrepreneurs

A

a person who invests money into a business and has the risk taking ability to conduct his business.

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38
Q

what do entrepreneurs do

A

they identify a gap in the market for a product/service and use the fop to produce it. if they are succesfull, they make a profit.

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39
Q

what are consumer goods

A

an economic good that satisfies an immediate consumer need or want

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40
Q

what are capital goods

A

goods which do not satisfy any immediate human wants but they are used in the production of other goods and services.

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41
Q

what is the buying of capital goods called

A

investment

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42
Q

what are merit goods

A

goods and services that benefit people but they cannot afford to pay for them so the government pays for it

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43
Q

what are public goods

A

goods and services provided by the government.

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44
Q

what is self sufficiency

A

when each person or community produces all the goods and services they want for themselves

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45
Q

what is specialisation

A

when people concentrate on doing things that they are the best at.

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46
Q

what is division of labour

A

when the production process is broken down according to different tasks

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47
Q

define producers

A

the people and organizations which make and sell goods and services.

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48
Q

what is resource allocation

A

it involves deciding how best to use scarce resources to satisfy as many needs and wants as possible.

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49
Q

define opportunity cost

A

the benefits/value of the next best alternative forgone

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50
Q

what do ppcs show

A

the maximum combined output of two products a firm or an entire economy can produce with its available resources and technology

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51
Q

when are resources being used efficiently

A

when they are producing their maximum output.

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52
Q

at what point on a ppc is there said to be unattainable allocation

A

outside the curve

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53
Q

at what point on a ppc is there said to be inefficient allocation

A

inside the curve

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54
Q

what is the basic economic problem

A

human wants are unlimited but resources are scarce

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55
Q

what are the 3 fundamental economic questions, explain them in one sentence,

A

what to produce (what kind of goods and services should be produce)

how to produce (what productive resources are used to produce goods and services.)

for whom to produce (who gets to have the goods and services)

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56
Q

differentiate between human needs are wants`

A

human needs are needed to be satisfied to survive

human wants are not needed to be satisfied to survive.
human wants are unlimited.

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57
Q

what is consumer spending called

A

consumption expenditure

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58
Q

what are the two types of consumer goods

A

consumer durable goods, non durable goods

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59
Q

what are consumer durable goods

A

goods which last a long time like cars

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60
Q

what are non durable goods

A

goods which are perishable or used up quickly`

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61
Q

what are the 4 type of goods

A

capital goods, merit goods, consumer goods, public goods

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62
Q

what are economic goods

A

goods which have some degree of scarcity in relation to demand

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63
Q

what are free goods

A

a good that is not scarce and available without limit and thus people dont pay for them.

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64
Q

what does an outward shift of the ppc indicate

A

increase in the quantity or quality of resources available to an economy

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65
Q

what does an inward shift of the ppc indicate

A

a reduction in the quantity or quality of resources available to an economy

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66
Q

list 3 economic systems

A

market economy system, planned economy, mixed economy system

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67
Q

define a free market economic system

A

all decisions are taken by private sector organizations and individuals and there is no public sector.

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68
Q

define a planned economic system

A

all decisions are taken by the government and there is no private sector.

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69
Q

what is a monopoly

A

a firm that is able to dominate or control market supply of a product.

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70
Q

what are the 3 sectors in an economy

A

primary sector
secondary sector
tertiary sector

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71
Q

what does the primary sector include

A

it involves the use/extraction of natural resources

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72
Q

what does the secondary sector include

A

it involves the manufacture of goods using the resources from the primary sector

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73
Q

what does the tertiary sector incude

A

all services provided in an economy

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74
Q

what is supply

A

the amount of goods and services producers are willing and able to sell to consumers at any given price is known as quantity supplied

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75
Q

what is the law of supply

A

the law of supply states that ceteris paribus, a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied

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76
Q

what is extension in supply

A

ceteris paribus, increase in quantity supplied due to the increase in prices which leads to upward movement along the supply curve

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77
Q

what is contraction of supply

A

ceteris paribus, decrease in quantity supplied due to decrease in prices leads to downward movement along the supply curve

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78
Q

when does a supply curve shift

A

whenever a non price factor influencing supply changes

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79
Q

what does a rightward shift in supply curve indicate

A

increase in supply

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80
Q

what does a leftward shift in supply curve indicate

A

decrease in supply

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81
Q

what is equilibrium

A

when quantity supplied and quantity demanded are equal, there is no surplus or shortage

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82
Q

what is surplus

A

when the supplied quantity exceeds the quantity demanded at a given price

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83
Q

what happens to price when there is excess supply

A

price falls until equilibrium is restored

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84
Q

what is excess demand

A

when the quantity demanded exceeds the quantity supplied at a given price

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85
Q

what happens to price when there is excess demand

A

price tends to rise until equilbirium is restored.

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86
Q

what happends to the demand curve when there is an increase in demand

A

it will cause the demand curve to shift to the right and create temporary shortage which will lead to increased price and increased q demanded

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87
Q

what happens to the demand curve if there is a decrease in demand

A

the demand curve will shift to the left which will create temporary surplus which causes lower price and decreased quantity demanded

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88
Q

what happens to the demand curve if there is an increase in supply

A

the supply curve will shift to the right creating temporary surplus causing lower prices and increased quantity supplied

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89
Q

what happens to the supply curve if there is a decrease in supply

A

shift in curve to the left creating temp. shortage causing increased prices and increased quantity demanded

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90
Q

what is demand

A

willingness and ability to purchase a good or service at any given price

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91
Q

what is individual demand

A

demand of just one customer

92
Q

what is market demand

A

the total demand for that product from all its consumers

93
Q

what is law of demand

A

ceteris paribus, if price of a good or a service increases, quantity demanded decreases and vice versa.

94
Q

what is contraction in demand

A

ceteris paribus, when price increases quantity demand decreases. there is a upward movement along demand curve

95
Q

what is extension in demand

A

ceteris paribus, when price decreases, quantity demanded increases. there is a downward movement along demand curve.

96
Q

what is increase in demand

A

consumers now demand more of a product at each and every price than they did before and demand curve will shif to the right.

97
Q

what is decrease in demand

A

consumers now demand less of a product at each and every price than they did before and the demand curve will shift to the left.

98
Q

what is ped

A

measure of responsiveness of q demanded to a change in p

99
Q

what is formula of ped

A

%change in q demanded/% change in price

100
Q

what is elastic demand

A

when change in price leads to greater change in qty demanded, PED>1

101
Q

what is inelastic demand

A

when change in price leads to smaller change in q demanded, PED<1

102
Q

what is perfectly inelastic demand

A

rise or fall in the price causes no change in q demanded. PED = 0

103
Q

what is perfectly

elastic demand

A

demand at a certain price is infinite. ped = infinite

104
Q

what is unitary elastic demand

A

when change in price = change in quantity demanded. ped=1

105
Q

what is total revenue

A

the amount paid by buyers and received by sellers of a good

TR = P x Q

106
Q

what should firms do if goods have elastic demand

A

reduce prices to increase profit

107
Q

what should firms do if goods have inelastic demand

A

increase prices to increase profits

108
Q

what is pes

A

measure of responsiveness of quantity supplied to a change in price

109
Q

pes formula

A

%change in q supplied/%change in price

110
Q

what is elastic supply

A

when changes in p lead to greater changes in q, PES>1

111
Q

what is inelastic supply

A

change in price results in smaller change in qty supplied, PES<1

112
Q

what is perfectly elastic supply

A

producers are prepared to supply any amount at a given price. pes = infinite

113
Q

what is perfectly inelastic supply

A

a price change will not affect supply at all. pes = 0

114
Q

what are indirect taxes

A

taxes placed on goods and services

115
Q

what is the effect of indirect taxes

A

increasing market price and reducing the qty traded

116
Q

what are income taxes

A

taxes levied on incomes of households and firms

117
Q

list 3 purposes of indirect taxes

A
  • generate tax revenue for a government
  • discourage consumption of harmful products
  • encourage consumption of good products
118
Q

list 2 types of indirect tax

A

specific, ad valorem

119
Q

how does a specific unit tax affect the supply curve

A

it shifts up the supply curve by the full amount of the tax so the new curve is parallel to the original one

120
Q

how will a percentage tax affect the supply curve

A

the curve will be shifted up by a certain percentage meaning that the new supply curve will not be parallel to the original.

121
Q

what are subsidies

A

an incentive given by the government to individuals or businesses in the form of cash, grants that improve the supply of certain goods and services.

122
Q

how does a subsidy affect the firms supply curved

A

the supply curve shifts to the right as cop reduces.

123
Q

what are social costs

A

social costs are the total costs borne by the society. social costs = private costs + external costs

124
Q

what is private cost

A

the private cost is any cost that a person or firm pays in order to buy or produce goods and services.

125
Q

how does private cost cause market failure

A

it doesnt take into account any negative effects or harm caused as a result of the product leading to overallocation.

126
Q

what are external costs

A

a cost incurred by a third party not responsible for the harmful activity.

127
Q

what are negative

externalities

A

a negative externality imposes external costs on third parties who did not agree to the action.

128
Q

what are social benefits

A

total benefits borne by the society. social benefits = private benefits + external benefits

129
Q

what are private benefits

A

Private benefit is the benefit derived by parties directly involved in a transaction

130
Q

what are external benefits

A

the benefits gained by third parties who are not involved in the economic transaction.

131
Q

why is there underproduction and uncerconsumption of merit goods

A

individuals and firms only think of their benefit and not the benefit of the entire society.

132
Q

what are the disadvantages of the market economic system caused by

A

market failure

133
Q

what is market failure

A

inefficient allocation of resources

134
Q

when does market failure happen

A

when free markets fail to produce outcomes in terms of prices and quantities that are socially or economically desirable.

135
Q

what does market failure result in

A

misallocation of resources and a reduction in social and economic welfare

136
Q

how can economic welfare be improved when total social benefit > social cost

A

by encouraging more production and consumption

137
Q

how can economic welfare be improved if total social cost > total social benefit

A

by reducing production and consumptions

138
Q

list 2 ways external costs can be reduced

A
  • raising indirect taxes on firms with activities that create external costs
  • use regulations to regulate the production or consumption of products (eg: smoking bans)
139
Q

lists 3 ways to correct positive externalities

A
  • ensure public sector provision of socially and economically desirable goods and services
  • provide subsidies to private sector firms to reduce the cost of activities and products that have external benefits
  • use regulation to encourage firms to change their production methods
140
Q

what can government do if public goods arent supplied

A

it can pay for provision of public goods like street lighting, policing and flood defences using money from taxes

141
Q

what can government do if few merit goods are supplied and consumed

A

it can directly employ fop to increase the supply of healthcare and education available to people. this provision can be paid from taxes so that its free and everyone can consume them.

142
Q

what can governments do if demerit goods are oversupplied and consumed, 3 points

A

it can ban the production and sale of demerit goods

or raise their price using indirect taxes so that fewer people consume them.

it may also set high minimum prices in the market for demerit goods and other goods with significant external costs.

143
Q

what can governments do if some firms exploit their consumers (2 points)

A

it can set maximum prices they cannot exceed to protect consumers.

it can also take over ownership and running of large powerful firms in a process known as nationalization

144
Q

what can governments do if firms exploit their employees

A

it can introduce employment laws and minimum wage laws to improve wages and working conditions.

145
Q

what can a government do to correct factor immobility obstructing firms (2 points)

A

it can provide education and retraining for workers who are occupationally immobile.

it can encourage private firms to move to areas of high unemployment by subsidizing their costs.

146
Q

what can governments do if goods with significant external costs are overprovided

A

indirect taxes to raise market price which reduces demand.

147
Q

what can government do it goods with significant external benefits are under provided

A

subsidies can be provided to reduce the cost of producing these goods and services, encouraging them to increase supply.

148
Q

for whom is maximum price implemented

A

consumer

149
Q

for whom is minimum price implemented

A

firm

150
Q

what is the impact of maximum price on consumers

A

they wont have to pay largely inflated prices

151
Q

what is the impact of max price on producers

A

they cant exploit consumers.

152
Q

how can shortage be eliminated in max price

A

government regulates that suppliers must expand supply and accept lower profits

153
Q

what is the impact of min price on consumers

A

people will be less inclined to purchase those products due to the increased price

154
Q

what is the impact of min price on producers

A

it allows them to compete with firms who can make and therefore sell products for cheaper.

155
Q

how can surplus be eliminated in min price

A

by supplying lesser to match the amount consumers are willing to buy.

156
Q

what are the three types of industrial sectors

A

primary industry
secondary industry
tertiary industry

157
Q

what is the tertiary industry divided into

A

direct service

commercial service

158
Q

what is the primary industry

A

extractive industry- extracting raw materials

159
Q

what does the secondary industry involve

A

manufactured and construction industries, processing raw materials into finished goods

160
Q

what does the tertiery industry involve

A

providing a direct commercial service

161
Q

what are direct services

A

offered directly to the public

162
Q

what are commercial services

A

offered to other businesses

163
Q

what are the 2 types of firms

A

private sector firms

state owned enterprises

164
Q

what are private sector firms

A

firms owned and run by private individuals

165
Q

list 4 legal forms of private sector firms

A

sole trader
joint-stock or limited company
cooperative
charity

166
Q

who owns sole trader firms

A

owned by one person

167
Q

who controls a sole trader

A

the owner is the main decision maker

168
Q

what is a sole traders main source of finance

A

owners personal savings

169
Q

how is profit distributed in a sole trader

A

the owner receives any profits but is also responsible for debt

170
Q

who owns a joint stock company

A

one or more shareholders

171
Q

who controls a joint stock company

A

it is controlled one more directors appointed by its shareholders

172
Q

what is a limited company main source of finance

A

sale of shares to shareholders

173
Q

to whom can private limited companies sell their shares

A

private individuals

174
Q

where can public limited companies sell shares

A

stock exchange

175
Q

how is profit distributed in a joint stock company

A

any profit belongs to its shareholders

shareholders are not personally liable to repay any company debts

176
Q

who owns a cooperative

A

its members

177
Q

who controls a cooperative

A

its managed by a board of directors appointed by its members

178
Q

how are cooperatives financed

A

from membership fees and drawing on reserves

179
Q

how is profit distributed in a cooperative

A

members receive any surplus revenue that is not added to the reserves

180
Q

who owns a charity

A

a charity can be set up and registered by a private individual or another organization to provide services for public benefit but it cannot be owned

181
Q

who runs a charity

A

its board of trustees

182
Q

whats a charity’s main source of income

A

gifts and donations from people and organizations

183
Q

how are profits distributed in a charity

A

they are reinvested in the charity to fund its services.

184
Q

what is a state owned enterprise

A

a firm that is wholly or partially owned and operated by a government primarily to carry out commercial activities in order to earn revenues and sometimes profits.

185
Q

what are the 2 ways in which a firm can grow

A

internal growth

external growth

186
Q

what is internal growth

A

when a firm expands its scale of production through the purchase of additional equipment, increasing the size of its premises, opening more branches, selling new products, employing more workers etc.

187
Q

what is external growth

A

when 2 or more firms join together to form a larger enterprise. this is known as integration

188
Q

what does integration involve

A

the merger of 2 or more firms or the takeover of one company by another.

189
Q

explain a takeover with an example

A

a takeover or acquisition happens when a company buys enough shares of anothers that they can take full control. facebooks acquisition of whatsapp in 2014

190
Q

does a takeover require the owners consent

A

no

191
Q

what happens to a firm after it has been taken over

A

it loses its identity and becomes a part of what is known as the holding company

192
Q

when does a merger happen

A

when owners of 2 or more companies agree to join together to form a firm

193
Q

what are the 3 ways an integration can happen

A

horizontal integration
vertical integration
lateral/conglomerate integration

194
Q

what are the two types of vertical integration

A

Forward vertical integration

backward vertical integration

195
Q

what is horizontal integration

A

integration of firms engaged in the production of the same type of good at the same level of production

196
Q

what is vertical integration

A

integration of firms engaged in the production of the same type of good but at different levels of production.

197
Q

what is forward vertical integration

A

when a firm integrates with a firm that is at a later stage of integration

198
Q

what is backward vertical integration

A

when a firm integrates with a firm that is at an earlier stage of production

199
Q

what is lateral integration

A

when firms producing different types of products integrates

200
Q

what is another name for lateral integration

A

conglomerate integration

201
Q

what are economies of scale

A

the unit cost advantages from expanding the scale of production in the long run. LRAC decreases

202
Q

what are diseconomies of scale

A

the cost disadvantages that firms acrue due to an increase in organizational size or output. LRAC increases

203
Q

what are internal economies of scale

A

LRAC is reduced as firms expand their scale of production

204
Q

what are external economies of scale

A

cost savings enjoyed by firms in a large industry

205
Q

what diseconomies of scale

A

disadvantages firms face when they grow too large and average costs start to rise.

206
Q

how does production add value to resources

A

by turning them into goods and services consumers want and are able to buy

207
Q

what is value added in production

A

the difference between the market price paid for a product by a consumer and the cost of the natural and man made materials, components and resources used to make it.

208
Q

what is productivity

A

productivity measures the amount of output (goods and services) that can be produced from a given amount of input (land, labour and capital resources)

209
Q

what is the most commonly used measure of factor productivity

A

labour productivity

210
Q

how to calculate labour productivity (2 ways)

A
  • average amount of output each employee produces per period of time
  • average amount of revenue each employee contributes per period of time
211
Q

average product of labour formula

A

total output per period/no. of employees

212
Q

average revenue product of labour formula

A

total revenue per period/number of employees

213
Q

average cost per unit formula

A

total cost/total output

214
Q

list 3 types of firms, not aiming to make profit

A

charities, not for profit organizations, public sector organization

215
Q

what are the 2 techniques of production

A

labour intensive

capital intensive

216
Q

what is labour intensive production

A

when ratio of labourers is higher than machinery

217
Q

what is capital intensive production

A

when the ratio of machinery is higher than the labourers

218
Q

list 3 things the relative demand for labour and capital by a firm will depend on

A
  • how much output consumers demand
  • the cost of labour relative to the cost of employing capital
  • the productivity of labour relative to capital.
219
Q

what is an economic system

A

is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area.

220
Q

what is microeconomics

A

the study of smaller scale economies

221
Q

what is macroeconomics

A

the study of the economic issues and actions that involve an entire economic system

222
Q

what is an uneconomic use of resources

A

use of resources in which social costs exceed the social benefit

223
Q

what is economic use of resources

A

use of resources in which social benefits exceed the social costs

224
Q

what are industries

A

industries consist of firms that use similar production processes and specialize in the production of similar range of products.

225
Q

what are the 2 problems with labour productivity

A

it does not take into account quality of work

some work like teachers are not quantifiable

226
Q

linear demand formula

A

y = 2x

Economics (1 decks)

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