Economic Unit 1 Exam Flashcards
What are non-
living standards?
Non-material living standards involve the quality of life factors, such as health, education, and environmental quality.
What are material living standards?
Material living standards refer to the physical goods and services available to people, like housing, food, and clothing.
How could floods influence material living standards
Floods can destroy homes and businesses, reducing the availability of goods and services, and lowering material living standards.
How could floods influence non-material living standards
Floods can cause stress, disrupt communities, and degrade the environment, negatively impacting non-material living standards.
Q1b1:
How do floods negatively impact economic activity?
Floods can halt production, damage infrastructure, and reduce consumer spending.
What is the traditional viewpoint of a business in the economy?
The traditional viewpoint is that businesses aim to maximize profit.
What is a movement along a demand or supply curve?
Movement along a curve occurs due to a change in price.
What is a shift of a demand or supply curve?
A shift occurs due to factors other than price, such as changes in production costs or consumer preferences.
What is an oligopoly?
An oligopoly is a market structure with few large firms dominating the market.
How might moving from an oligopoly to monopolistic competition influence for example milk production?
It could increase production as more firms enter the market, leading to more competition and variety.
How do changes in relative prices reallocate resources?
Higher prices in one market attract resources from other markets, increasing supply in the high-price market.
How does this reallocation improve efficiency?
Resources are used where they are most valued, optimizing overall production and efficiency.
How might farmers respond to government incentives like the flood relief program
: Farmers may use grants to cover immediate costs and invest in resilient farming practices, improving long-term productivity.
What is traditional economics?
Traditional economics assumes rational behavior and maximization of utility or profit.
What is a key insight of behavioral economics?
People often make irrational decisions, influenced by biases etc. Behavioural economics argues that, in the real-world, consumers behave differently, only having bounded (limited) rationality and bounded (limited) self-interest
Q: What is behavioral economics?
Behavioral economics studies how psychological factors affect economic decisions.
Give an example between behavioural economics and traditional economics.
For example, consumers may be rational some of the time, but due to the busy nature of everyday life, they often have to make snap decisions using biases rather than weighing the costs and benefits of every decision.
What is the traditional economics viewpoint of self-interest?
People will only do things that benefit them individually.
What is the key behavioural insight of bounded self-interest?
Consumers exhibit self-interest only in certain circumstances and sometimes act against their self-interest.
Give an example of bounded self-interest in emergency situations.
People often help others in disasters like fires or building collapses, even at the risk of injury or death.
What is ‘status quo’ or ‘default option’ bias?
It’s the tendency of consumers to stick with their current providers even if better options are available.
Give examples of services where ‘status quo’ bias is commonly observed.
Mobile phone plans, internet providers, mortgage lenders, insurance providers, and energy providers.
How can governments use ‘nudges’ to overcome ‘status quo’ bias?
By offering incentives, such as the Victorian government’s $250 incentive for comparing energy bills. Which it t encourages them to switch to more affordable or better-quality energy providers.
Q: How does this ‘nudge’ affect businesses?
It forces businesses to offer better products at lower prices, knowing consumers are looking to change providers.
Why do businesses exploit ‘status quo’ bias?
A: They often charge existing customers more than new customers due to the familiarity bias.
What is the overall benefit of the ‘nudge’ in the energy market?
It improves resource allocation and market competition, leading to better prices or quality products.
What is the primary goal of the private sector?
To maximize profit.
Q: What is the primary goal of the public sector?
To provide public goods and services and improve societal welfare.
Q: How can businesses engage in anti-competitive behavior?
By forming cartels, price-fixing, or creating barriers to entry.
How does the government redistribute income to improve living standards?
A: Through taxation and welfare programs, such as unemployment benefits.
How is how are goods and services produced in Australia answered?
Australia produces goods and services using a combination of advanced technology, skilled labor, and natural resources, with an emphasis on efficiency and sustainability. Both private enterprises and government regulations shape production methods.
How is What does Australia produce answered?
Australia decides what to produce based on market demand and government policies. Key industries include mining, agriculture, and services, driven by both domestic needs and export opportunities.
How is for whom are goods and services produced in Australia answered?
Australia distributes goods and services based on market mechanisms (who can afford to pay) and government interventions (welfare programs, public services) to ensure a more equitable distribution of resources.
What type of economic system does Australia have?
Australia operates a mixed economy, incorporating elements of both market and command economies.
The private sector drives most economic activities, but the government plays a significant role in regulation, welfare, and providing public goods and services.
