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G10 Commerce > Economics > Flashcards

Economics Flashcards

1
Q

economics

A

study of how society chooses to allocate its scarce land, labour and capital resources to the production of goods and services to satisfy the population’s needs and unlimited wants

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2
Q

needs

A

something essential for a person’s survival and are limited

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3
Q

wants

A

a desire that is not essential for survival and are unlimited

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4
Q

definition of factors of production (economic resources)

A

inputs that are used in production of goods and services

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5
Q
A
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6
Q

land

A

any natural resource provided by nature used in the process of production (wood, iron, oil)

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7
Q

labour

A

mental and physical capacity of workers to produce goods and services (plumbers, teachers)

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8
Q

capital

A

man made tools, machinery and equipment used in production of goods and services (trucks, hammers)

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9
Q

enterprise

A

entrepreneurship

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10
Q

three main ideas that form the foundation of economics

A

scarcity, choice and opportunity cost

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11
Q

scarcity

A

we have unlimited wants, however we have limited resources (fundamental challenge of meeting unlimited human wants and needs with limited land, labour and capital resources)_

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12
Q

what must people do because of scarcity

A

make choices!!

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13
Q

choice

A

an economic decision made between competing alternatives

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14
Q

opportunity cost

A

the choice that you make will come at a price, and that is opportunity cost. The loss of the value of the next best alternative forgone whenever an economic decision is made

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15
Q

production possibilites model

A

a simple economic tool used to illustrate the trade offs that exist when an economy decides what goods to produce

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16
Q

2 assumptions that the PPM makes

A
  1. that an economy can only produce two different goods or services
  2. that all scarce resources are being fully utilised
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17
Q

what is the PPM represented by

A

a graph called the production possibility frontier (PPF)

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18
Q

whats on the y and x axes of the PPF

A

each axis has one good and we’ll be given the outputs to make a curve

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19
Q

why would the PPF curve move up?

A

because there are more resources now

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20
Q

why would the PPF curve move down?

A

because there are less resources now

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21
Q

opportunity cost through PPF

A

the OC of spending resources on one good is the amount of the other good that cannot be made

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22
Q

behavioural economics

A

a field of study that combines psychology, economics and neuroscience to better understand how people make decisions in real world situations

23
Q

traditional view of consumer behaviour

A

that all decisions a consumer makes are rational

24
Q

assumptions of a rational consumer

A

consumers will always make logical decisions to maximise their satisfaction and is always for themselves

25
Q

bounded rationality definition

A

concept that suggests that people have limited rationality and make decisions based on a limited set of information and cognitive abilities that often rely on mental shortcuts to simplify complex decision making

26
Q

types of bounded rationality in decision making (5)

A

herd behaviour, vividness, framing effect, anchoring bias, sunk cost fallacy

27
Q

sunk cost fallacy

A

where people keep investing because they have already been investing

28
Q

bounded willpower

A

the idea that consumers are impulsive and emotional

29
Q

bounded self interest

A

idea that consumers care about others and not just themselves

30
Q

macroeconomics

A

branch of economics that looks at the big picture of the economy as a whole – looks at the overall performance of of a country

31
Q

inflation

A

the cost of living – if goods and services go up, you get less for your money

32
Q

economic activity

A

the overall level of production and consumption of goods and services in an economy over a certain period of time

33
Q

what does high economic activity indicate

A

that people are spending money and that the economy is growing

34
Q

what does low economic activity indicate

A

indicates the economy is experiencing slow growth

35
Q

what is the economic cycle

A

production – more employment – more wages – more purchasing power – more production

36
Q

types of living standards (2)

A

material and non material

37
Q

whats the current inflation rate of australia

A

4%

38
Q

consequences of inflation

A

reduced purchasing power and the wage-price spiral

39
Q

reduced purchasing power

A

high inflation = increase of price of goods and services = people cant buy as much = decrease in standard of living

40
Q

wage price spiral

A

high inflation = loss of purchasing power = higher wage demands = cost of labour goes up = increase prices = inflation

41
Q

causes of inflation (2)

A

excessive spending in the economy and costs of production

42
Q

what is a policy used to decrease inflation

A

interest rate

43
Q

what is an interest rate

A

the cost of borrowing money

44
Q

trade

A

the buying and selling of goods and services across international boundaries

45
Q

imports

A

the things that the country buys

45
Q

exports

A

the things that the country sells

46
Q

free trade

A

the absence of gov intervention in international trade (unrestricted trade)

47
Q

benefits of free trade (4)

A

increased competition, specialisation, greater choice for consumers, increased flow of new ideas and tech

48
Q

increased compeition

A

means lowered prices

49
Q

absolute advantage

A

ability of one country to produce a good using fewer resources than another country

50
Q

theory of absolute advantage

A

since a country is better than the others, it leads to increased material living standards

51
Q

negatives of free trade

A

increased unemployment, infant industries cannot develop, predatory pricing and loss of culture

52
Q

increased unemployment

A

domestic companies shut down because the companies overseas are better and cheaper

53
Q

predatory pricing

A

where they lower the prices at the right time and raise it on others

G10 Commerce (4 decks)

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