econ final year 10 Flashcards
what are factor rewards
payments different factors of production require to recieve in order to participate in productive activity.
what is the factor rewards owners of land often require and who do they get it from. give an example
owners of land usually require payment of rent to supply resources to firms
eg- for the purpose of farming or extraction of oil
what factor rewards do people who supply labour get
people will supply labour to firms in return for payments called wages
list 2 factors which affect wages
the area where a person works and what work they do
what factor rewards do banks get
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.
what factor rewards do firms get
profit is the reward for undertaking risk.
what is profit
if a firm earns more revenue than costs, there is a surplus left called profit.
what is a loss
if a firms costs are more than its revenue then it is called a loss
what is factor mobility
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.
what are the 2 types of factor mobility
occupational mobility, geographic mobility
define occupational mobility
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
give an example of occupational mobility between different firms in the same industry and an example between different industries
different firms- selling equipment from one manufacturer to another
different industries- a worker moving from a car manufacturer to a clothing manufacturer
what is geographic mobility
the ability to move factors of production to different locations
give an example of geo. mobility
when labour moves between different countries
why is labour immobile (2 points)
- 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.
why is geo. immobility prominent in developed nations
- moving houses can be expensive
why are many natural and human made resources immobile
because they cannot be used in different production activities so if they have no other use, they create a wastage of resources.
why is land as a resource geographically immobile with example
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.
why is capital geographically mobile with example (2 points)
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.
how can labour be mobile
by investing in different skills which can be used in different areas.
how can factor quantity of labour be increased (3 points)
- 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
how can labour factor quality be increased
training and education can improve skills of the worker as well as the amount and range of goods and services they can produce.
how can factor quantity of capital be increased (2 points)
increased production of capital goods by producers
increase in interest payments will increase the amount of capital, investors are willing to supply
how can capital quality be increased
advances in technology improve speed and accuracy of modern equipment
how can enterprise quantity be increased (2 points)
- 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
how can enterprise quality be increased (2 points)
- more and better training courses on entrepreneurship
- more and better support for new entrepreneurs.
what is an economy
an economy is an area where there is production and exchange of goods and services
what is production
using inputs (resources) to make outputs (goods and services) to satisfy the needs and wants of consumers.
what is consumption
the use of goods and services to satisfy human needs and wants
what is exchange
the purchase of goods and services by an entity not produced by it.
what is exchanged in a modern economy
money for goods and services
what are the 4 fop
land, enterprise, labour, capital
define land
land refers to all the natural resources on our planet
define labour
the physical and mental effort provided by people to design, make and sell economic goods and services.
define enterprise
the ability to organize production in a firm.
define capital
all the human made resources used to produce goods and services
who are entrepreneurs
a person who invests money into a business and has the risk taking ability to conduct his business.
what do entrepreneurs do
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.
what are consumer goods
an economic good that satisfies an immediate consumer need or want
what are capital goods
goods which do not satisfy any immediate human wants but they are used in the production of other goods and services.
what is the buying of capital goods called
investment
what are merit goods
goods and services that benefit people but they cannot afford to pay for them so the government pays for it
what are public goods
goods and services provided by the government.
what is self sufficiency
when each person or community produces all the goods and services they want for themselves
what is specialisation
when people concentrate on doing things that they are the best at.
what is division of labour
when the production process is broken down according to different tasks
define producers
the people and organizations which make and sell goods and services.
what is resource allocation
it involves deciding how best to use scarce resources to satisfy as many needs and wants as possible.
define opportunity cost
the benefits/value of the next best alternative forgone
what do ppcs show
the maximum combined output of two products a firm or an entire economy can produce with its available resources and technology
when are resources being used efficiently
when they are producing their maximum output.
at what point on a ppc is there said to be unattainable allocation
outside the curve
at what point on a ppc is there said to be inefficient allocation
inside the curve
what is the basic economic problem
human wants are unlimited but resources are scarce
what are the 3 fundamental economic questions, explain them in one sentence,
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)
differentiate between human needs are wants`
human needs are needed to be satisfied to survive
human wants are not needed to be satisfied to survive.
human wants are unlimited.
what is consumer spending called
consumption expenditure
what are the two types of consumer goods
consumer durable goods, non durable goods
what are consumer durable goods
goods which last a long time like cars
what are non durable goods
goods which are perishable or used up quickly`
what are the 4 type of goods
capital goods, merit goods, consumer goods, public goods
what are economic goods
goods which have some degree of scarcity in relation to demand
what are free goods
a good that is not scarce and available without limit and thus people dont pay for them.
what does an outward shift of the ppc indicate
increase in the quantity or quality of resources available to an economy
what does an inward shift of the ppc indicate
a reduction in the quantity or quality of resources available to an economy
list 3 economic systems
market economy system, planned economy, mixed economy system
define a free market economic system
all decisions are taken by private sector organizations and individuals and there is no public sector.
define a planned economic system
all decisions are taken by the government and there is no private sector.
what is a monopoly
a firm that is able to dominate or control market supply of a product.
what are the 3 sectors in an economy
primary sector
secondary sector
tertiary sector
what does the primary sector include
it involves the use/extraction of natural resources
what does the secondary sector include
it involves the manufacture of goods using the resources from the primary sector
what does the tertiary sector incude
all services provided in an economy
what is supply
the amount of goods and services producers are willing and able to sell to consumers at any given price is known as quantity supplied
what is the law of supply
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
what is extension in supply
ceteris paribus, increase in quantity supplied due to the increase in prices which leads to upward movement along the supply curve
what is contraction of supply
ceteris paribus, decrease in quantity supplied due to decrease in prices leads to downward movement along the supply curve
when does a supply curve shift
whenever a non price factor influencing supply changes
what does a rightward shift in supply curve indicate
increase in supply
what does a leftward shift in supply curve indicate
decrease in supply
what is equilibrium
when quantity supplied and quantity demanded are equal, there is no surplus or shortage
what is surplus
when the supplied quantity exceeds the quantity demanded at a given price
what happens to price when there is excess supply
price falls until equilibrium is restored
what is excess demand
when the quantity demanded exceeds the quantity supplied at a given price
what happens to price when there is excess demand
price tends to rise until equilbirium is restored.
what happends to the demand curve when there is an increase in demand
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
what happens to the demand curve if there is a decrease in demand
the demand curve will shift to the left which will create temporary surplus which causes lower price and decreased quantity demanded
what happens to the demand curve if there is an increase in supply
the supply curve will shift to the right creating temporary surplus causing lower prices and increased quantity supplied
what happens to the supply curve if there is a decrease in supply
shift in curve to the left creating temp. shortage causing increased prices and increased quantity demanded
what is demand
willingness and ability to purchase a good or service at any given price
