Economic Principles Flashcards
What is a trade off
getting one thing usually means giving up another eg. work vs leisure
what type of trade off might the government face
spending money on education vs defence
what type of trade off might a person face
studying vs tv
what type of trade off might a firm face
environmentally friendly and expensive products or cheaper products
what is efficiency
society getting the most it can from its scarce resources
what is equity
benefits of resources are being distributed fairly among the members or society
example of people responding to incentives
plastic bag levy, people start using bag for lives more
petrol prices increase, people start using public transport more often
examples of how trade can make everyone better off
gains, competition, specialising in what theyre good at eg oranges in spain,
negatives of trade
when China joined the World Trade Organisation, it increased competition in labour markets, resulting in unemployment elsehwere, eg now USA has taxes on Chinese imports
what is a market economy
an economy that allocates resources through the decentralised decisions of many firms and households as they interact in markets for goods and services
example of the government improving market outcomes
social welfare payments aim to achieve a more balanced spread of resources and economic wellbeing
what is market failure
when the market fails to allocate resources efficiently
two things that may cause market failure
externality and market power
what is externality
impact of a firm’s/individual’s behavior on a bystander
what is market power
ability of a single firm/individual to affect market prices eg Microsoft dominates operating systems market
what is economic growth
the increase in the amount of goods and services an economy produces over time
what does gdp stand for
gross domestic product per head
what is gdp per head
the markets value of all final goods and services produced within a country over a given period divided by the population of the country per capita figure
what is the standard of living
measure of welfare based on the amount of goods and services a person’s income can buy
examples of inflation
zimbabwe 2007 2,200% and 2008 321,000,000%
what is inflation
increase in the overall level of prices in the economy ie the value of money falls
what happens when the government prints too much money
inflation
what is productivity
quantity of goods and services produced from each hour of a worker in a factories production line
