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11 Economics > Economics AOS1 > Flashcards

Economics AOS1 Flashcards

1
Q

Define Micro-Economics

A

A branch of economics that studies individuals and firms regarding the allocation of scarce resources.

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2
Q

Define Macro-Economics

A

A branch of economics that deals with the performance of a nations economy.

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3
Q

Define Economics

A

Economics is a social science that studies the production, consumption and distribution of goods and services.

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4
Q

Positive economics statement

A

Positive is clearly measurable and facts based.

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5
Q

Normative economics statement.

A

Normative is opinion driven and involves statements like ‘should’

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6
Q

Define factors of production and give examples

A

Land (gold), Labor(accountant), Capital(taxi) and entrepreneurship(buisnessowner).

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7
Q

Distinguish economic wants and needs

A

A want is something that a consumer desires but isn’t required (new iPhone) but a need is something a consumer requires for survival (shelter).

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8
Q

Explain why resources are limited but wants and needs are unlimited.

A

There are a finite amount of resources available for production on this earth however as consumer wants are fulfilled they’ll continue to want more.

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9
Q

Define relative scarcity and the basic economic problem

A

There is a limited number of resources to fill consumers unlimited wants.

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10
Q

Explain how relative scarcity creates need for decision making

A

Producers and consumers need to make economic decisions that are defined by their wants/needs and the limited amount of resources at their disposal.

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11
Q

Define opportunity cost

A

Opportunity is the value of the next best alternative forgone when making an economic decision

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12
Q

Define relationship between relative scarcity and opportunity cost

A

Due to relative scarcity and the limited resources available consumers must make a decision between resources, forgoing the ability to buy other resources.

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13
Q

PPF: - On the curve -Over the curve - Under the curve.

A

-Producing at maximum efficiency of two resources
-Not possible currently but could be with the increase in production/resources
-Not producing efficiently

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14
Q

Explain how PPF shows opportunity cost, relative scarcity etc.

A

The curve shows maximum resources while the points show the opportunity cost of producing at different points.

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15
Q

Differentiate technical and allocative efficiency

A

Technical efficiency is the situation that a nation is producing resources at the max amount possible, allocative efficiency however is the nation producing resources at the maximum consumer and nation benefit.

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16
Q

Define trade off

A

A trade off is everything forgone when making an economic decision.

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17
Q

Define cost benefit analysis

A

The comparison of the expected costs vs the expected benefits of a course of action or project.
Bad<1<Good

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18
Q

Describe relationship between Cost benefit analysis, trade offs and opportunity cost.

A

An individual may weigh up the opportunity cost and cost-benefit ratio when making an economic decision.

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19
Q

The three basic economic questions

A
  1. What to produce
  2. How to produce
  3. For whom to produce
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20
Q

Define each basic economic question

A

What - Concerns how we should allocate our scarce resources for production.
How - This question asks what combination of production (Labour and capital) should be used for profit and productivity.
For whom - How resources are allocated between members of society and who will benefit from this.

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21
Q

Describe features of market vs planned systems of decision making

A

Market decision making involves resources being allocated in response to consumers and producers rational decisions. Planned is completely different as it involves government being responsible for resource allocation.

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22
Q

Describe features of capitalist vs socialist resource ownership

A

In a capitalist economy resources are owned and controlled privately however in a socialist economy resources are owned and controlled by the government.

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23
Q

Define traditional economic system

A

A traditional economy is based on customs beliefs and traditions that guide production, distribution and consumption of goods and services.

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24
Q

Explain why Australia is a classified as a mixed economy

A

Australia is a mixed economy as the government has control over certain things such as the production of roads however citizens still have private ownership over a majority of things like land.

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25
Q

How does capitalism vs socialism answer the 3 basic economic questions.

A

Capitalism - Businesses responds to what people decide to buy. Produce based on what’s most productive/profitable. Resources are allocated to those who can afford them.

Socialism - Government allocates resources to individuals. Government produces on what it deems to be beneficial to the nation. Government produce resources to everyone equally.

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26
Q

3 Sector flow model: Flow 1

A

Households provide resources/factors of production to businesses

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27
Q

3 Sector flow model: Flow 2

A

Businesses return income to households for providing resources/factors of production

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28
Q

3 Sector flow model: Flow 3

A

Households and government expenditure on goods and services to business (government and household)

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29
Q

3 Sector flow model: Flow 4

A

Production of goods and services (Real GDP)

30
Q

3 Sector flow model: Leakage

A

Taxes etc (Households)

31
Q

3 Sector flow model: Injection

A

Government expenditure (businesses)

32
Q

Define economic activity

A

Economic activity refers to production, income and expenditure that takes place in an economy.

33
Q

Define living standards

A

The overall level of welfare of the people in an economy with a consideration for both material and non material living standards.

34
Q

Material living standards

A

A consumers access/ability to purchase goods and services

35
Q

Non material living standards

A

Non-monetary factors that contribute to overall quality of life

36
Q

How is GDP used to measure living standards

A

Standard of living is measured by GDP per capita which divides a nations GDP by its number of people. This shows a rough amount of wealth distribution and therefor peoples material living standards. It’s limited however as it doesn’t help economists understand non material living standards.

37
Q

Relationship between material and non material living standards

A

An increase in material living standards can mean an boost non material living standards as an increased access to resources assist with things such as leisure time.:

38
Q

Define economic agents

A

Economic are individuals and organisations that participate in the economy and make economic decisions.

39
Q

Define public sectors in the economy

A

The public sector is the economic decisions made by government and its ownership/control of resources.

40
Q

Define private sector

A

The private sector is the private ownership and control of resources, it involves economic decisions being made by private owners.

41
Q

Describe the traditional economic viewpoint of consumers

A

Its assumed a consumer has access to accurate information the aids them in making rational economic decisions aimed at maximising their utility.

42
Q

Describe the law of diminishing marginal utility

A

As consumption increases the number of marginal utility (satisfaction) will decline

43
Q

Distinguish marginal and total utility

A

Marginal utility is amount of satisfaction gained from the consumption of a good or service however total utility is the total amount of satisfaction a consumer feels over the consumption of a good or service.:

44
Q

How do businesses apply the law of diminishing returns to increase sales

A

Businesses can understand when marginal utility starts to fall a substantial amount and may offer larger amounts of items at a cheaper price per item in order to encourage consumers to purchase more.

45
Q

Distinguish incentives and disincentives

A

An incentive will encourage economic agents to make particular choices however a disincentive may discourage economic agents from making specific decisions.

46
Q

Define subsidies (consumer)

A

The Australian government pays cash to encourage consumers to purchase a product brings personal or social benefits (Solar)

47
Q

Define tax rebates (consumer)

A

Tax rebates are a tax discount that reduces the amount of tax paid making an item cheaper and more attractive to purchase

48
Q

Explain how tax and subsidies act as an incentive to consumers

A

Tax rebates and subsidies are incentives as they essentially decrease the cost of a product making it more appealing to consumers

49
Q

Define taxes (indirect) (consumer)

A

Government impose indirect tax on products they deem dangerous to buyers or has bad effects on the community

50
Q

Define regulations (consumer)

A

Government regulates the consumption of particular goods and services (Alcohol age limit)

51
Q

Explain how taxes and regulation act as a disincentive to consumers

A

Taxes and regulation are a disincentive as they increase the price of products making them less appealing to consumers

52
Q

Define profit

A

Profit is the amount of money a business makes after misusing expenses from its total income.

53
Q

Explain the traditional viewpoint of businesses driven by profit maximisation

A

The traditional viewpoint of businesses act on self interest and aim to maximise their profit.

54
Q

Define subsidies (business)

A

The government uses subsidies/cash payments to help cover production costs and improve profitability

55
Q

Define tax rebates (business)

A

The government uses tax rebates as incentives to businesses to produce certain goods and services.

56
Q

Define taxes (business)

A

Tax is levied directly on the dollar profit. Taxes can reduce final profit.
The government uses these to affect business decisions and reduce market failure.

57
Q

Define regulation (business)

A

Government creates laws and regulations to the distribution of goods and services. (Packaging musts, product info etc)

58
Q

Explain how tax rebates and subsidies are an incentive to businesses

A

Tax rebates and subsidies are an incentive as they increase income or decrease cost of production making the production of a particular goof or service more profitable.

59
Q

Explain how taxes and regulation act as a disincentive to businesses

A

Taxes and regulation are a disincentive to businesses as they can limit production and increase production costs making it less profitable and less attractive to produce.

60
Q

Explain the traditional viewpoint of government as being the maximisation of living standards

A

The traditional role of the government is to maximise material and non material living standards. This can involve economic stabilisation, improving efficiency in resource allocation and redistributing income to improve living standards.

61
Q

Define the business cycle

A

The business cycle refers to the cyclical movement of the economy over time, its measure in real GDP.
Measure in: Expansions, Peaks, Contractions and troughs.

62
Q

Define aggregate demand

A

Aggregate demand = GDP
Aggregate demand is the total expenditure on final foot and services within Australia’s borders

63
Q

Describe aggregate demand policy

A

Monetary - Increasing (contractionary) and decreasing (expansionary) cash rate to have opposite effect on demand.
Budgetary - Taxes increase gov spending decreased (Expansionary) and vice versa (Contractionary)

64
Q

Describe the three macroeconomic goals to stabilise the economy

A
  1. Strong and sustainable economic growth - Strong growth of about 3-3.5% a year the balances low unemployment and inflation.
  2. Full employment - A low and stable unemployment rate (4.25%)
  3. Low and stable inflation - Keeping price increases low (2-3%)
65
Q

Explain relationship between economic stability and living standards

A

A stable, growing economy means living standards gradually improve. Low unemployment means more people with money and low inflation means low product prices.

66
Q

Describe aggregate supply policies

A

Aggregate supply policies are a longer term strategy to help the government achieve its goals. Aim to improve willingness and ability of businesses to supply resources thus increasing productive capacity (PPF).

67
Q

Describe the government’s goal of efficient allocation of resources

A

The government strives to promote an efficient allocation of resources that maximise the nations welfare and living standards. This is useful in allocative efficiency.

68
Q

Describe the government’s goal of a more equitable distribution of income

A

The government aims to promote a more equitable distribution of income. The government wants to redistribute income (Centrelink etc) in a fair but equal manner to ensure a dignified standard of living for all citizens and avoid absolute poverty.

69
Q

Describe 2 ways the government aims to achieve a more equitable distribution of income

A
  1. Maintain a progressive personal tax system (higher incomes pay more tax)
  2. Provide means tested transfer payments to financially support the most disadvantaged members of society.
70
Q

Define market failure

A

Market failure is the economic situation defined as the inefficient allocation of resources when individuals act in self interest.

11 Economics (6 decks)

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