Economics basic Understanding #2 Flashcards
From online textbook
How is labor from household rewarded for their leisure time?
They are rewarded in wages and salaries.
How is capital for rewarded?
receives interest as a reward, the extra amount
How is enterprise rewarded?
Profit is the reward, by finding and taking action on income-earning opportunities the entrepreneur is able to make profit for the business,
How is land rewarded?
The reward is the rental
Outline four reasons why division of labour and specialisation is more effective.
1)By focusing on a particular stage, they can become highly adept, and thus more efficient, at carrying out that task. Meaning specialisation allows the better use of limited resources, so that overall the economy can produce more.
2)people are not all the same, so some are better at certain activities.
3) workers do not spend time moving from one activity to another.
4) may also enable firms to operate on a larger scale of production.
Outline the difference between production and productivity
Production is the output of a good and productivity is the efficiency with which a
good is produced
Describe how specialization extends to firms and national level.
For Firms, One firm may specialise in producing tyres; another may produce
windscreens; another may focus on assembling the final product.
For national level, some countries
are better equipped to produce some products than others
Outline 3 disadvantages of overspecialise
1)If workers spend all of their time on repetitive tasks, they are likely to get bored, and begin to lose job satisfaction.
2) the tedium of their tasks may lead them to lower concentration and become careless and inefficient.
3)If a firm focuses on production of a very narrow range of products and then finds
that demand is falling for those products, then it will face difficulties.
Give one way a business/firms can counter threat of one product’s demand falling.
to maintain some diversity in the output range, in the hope that demand
will not fall for all products simultaneously.
Explain the strategic reasons why nations should not overspecialise.
If a nation were to be completely dependent on imported foodstuffs, and then became engaged in a war, this could leave the country in a very vulnerable position.
Give an example of an establishment created to prevent the threat caused by overspecialisation.
The European Union
Enterprise provides ________and ______ in an economy, especially within the sector dominated by _____ and _________-sized firms.
dynamism, innovation,small, medium
Entrepreneurs are seen as being especially
important in contemporary economies. In the role of an effective entrepreneur, what should they be able to do? ( list 3 skills)
1)identify potential income-earning opportunities for businesses
2)is willing to assess and bear the risk involved in embarking on new projects or
start-ups.
3)for organising the other factors of
production in the most efficient and effective way.
State the three terms used to describe time periods in economic thinking
-Short run
-Long run
-very long run
What did Adam Smith propose?
the notion of division of
labour, which suggests that workers can become more productive by specialising in stages of the production process.
