Economics Flashcards
Describe the 3 basic economic questions used to deal with relative scarcity.
What to produce:
Producers who manufacture and offer goods for sale want to make as much money from selling their goods.
How to produce:
Producers want to produce their goods as cheaply as possible, they have to decide which resources they will use to get the best result.
For whom to produce:
Economic decisions about who to produce are influenced by the people who demand the goods. (Types of goods - prices people prepared to pay)
Define the term ‘relative scarcity’
Worldwide economic problem where we cannot satisfy all our wants as there is not enough resources.
Differentiate between planned and market economies.
Planned economy: a government plans and decides what, how and for who, to produce their goods. Free enterprise is not encouraged
Market economy: a business plans and decides what, how and for whom to produce their goods on the principle of the consumer sovereignty.
Explain the 3 major stages of production.
Primary: extraction stage - the use of raw materials
Secondary: fabrication stage: manufacture of finished or intermediate goods
Tertiary: distribution stage: finished product - able to sell
Describe the factors of production with use of examples.
Natural resources: raw materials provided by our environment. This includes our physical environment and the weather. (Minerals, land, oil, rainfall, trees, wind)
Human resources: (labour) include all the skills, competencies and physical and mental effort that people contribute when producing goods and services. (Labour of a miner, social worker)
Manufactured resources (capital): are physical resources produced by humans. (Human-made goods) (photocopiers, machinery, robots)
Management resources (enterprise): are all the various skills and talents required for good management.
Define the term complementary good.
An item that compliments the item you are buying
DVD - dvd player
Define the term substitute good
The relationship of the demand schedules when the price of one good changes
Explain what is meant by ‘opportunity cost’
A decision to have one thing results in the loss of another, that is production in one area is sacrificed to gain an advantage in another area of production
Define ‘economy’
Made up of factors such as environmental, social and political elements as well as goods/services, needs/wants and relative scarcity
Explain how economic activity is measured
Measured by GDP
GDP - measures the value of all the goods and services produced by a nation in a year
Describe the relationship between at least two of the participants within the economy. (Businesses, consumers, governments, financial institutions)
Governments: levy taxes, spend on goods and services and pay wages
Consumers: buy goods and services, earn wages and salaries.
They are related because consumers pay tax which goes to the government and thats how they receive their money which they spend on goods and services.
Explain the law of demand and supply
(Consumers) - the quantity that buyers are prepared to purchase at a given price.
⬆️ prices = ⬇️ demand
⬇️ prices = ⬆️ demand
(Producers) - the quantity of a good that producers are willing to produce and sell
⬆️ prices = ⬆️ supply
⬇️ prices = ⬇️ supply
Define the term equilibrium
When consumers and producers are both satisfied
Outline 2 factors that may cause a shift in demand
- Taste & Fashion - depends what is ‘in’ at the moment so what people will demand more of
- Advertising & Marketing - promotion of a product (articles, on the tv)
Outline 2 factors that may cause a shift in supply
Seasonal - depending on climate will depend on products that are supplied
New technology - always new models of computers, phones with the most recent updates and applications
Describe two benefits of economic growth
Less poverty - more people are employed which lowers the unemployment rate and poverty
Higher incomes and wealth - more money available to pay for more employment positions - creates a better standard of living
Describe negative consequences of economic growth
Rise inflation: upward movement of prices in goods/services - more expensive
Increased pollution: creating a poor standard of living and ruining the environment
Not enough goods and services to reach demand (companies will be out of stock)
The government has a major role of managing the economy. Explain in detail how it can manage the economy using macroeconomic policy.
Macroeconomic policy deals with the whole of the economy through budgetary and monetary policies.
Budgetary: the government uses the money collected from taxes to spend on education, transport etc.
Monetary: it focuses on controlling the level of official interest rates within the economy. ⬆️ interest rates - not much spending -greater investment, ⬇️ interest rates - encouraged to spend more - less investment
Describe how microeconomic policy can assist the management of the economy
If you can improve the microeconomic policy then these improvements were eventually flow to the macroeconomic economy, because if they start in small areas then the larger quarters of the economy begin to use these policies.
Define the term ‘globalisation’
The trend towards integrating the world markets for goods, services and money.
Describe 3 advantages and 3 disadvantages of global trade
Advantages:
- Enables a country to consume things which either cannot be produced within its borders or production may cost very high. Therefore it becomes cost cheaper to import from other countries through foreign trade.
- Imports and exports of different countries provide opportunities to the consumer to buy and consume those goods which cannot be produced in their own country. They therefore get a diversity in choices
- Lowers inflation rates
Disadvantages:
- Imports of harmful goods which may run the health of the residents of the country
- Weakens our national defence
- Increases economic instability
Differentiate between imports and exports
Imports: goods/services brought into the country
over an international boundary
Exports: goods/services shipped out of the country over an international boundary
Define employment
Involves those members of the Labour force with paid jobs who work for more than one hour per week
Define labour force
The number of people aged 15 and over who are either employed or actively seeking work
