Economics/business Flashcards
What is the difference between needs and wants?
Goods are items that you can physically touch (tangible), whereas a service is something that you cannot tough (intangible) and is provided for you.
What is the basic economic problem?
The basic economic problem is one of scarcity.
What is opportunity cost?
Opportunity cost is the sacrifice of the next best alternative foregone.
Define and give examples of the factors of production.
The first factor of production is capital which is the man-made resources used to produce goods and services e.g. coffee makers, schools, computers. The second factor of production is enterprise which is the bringing together of the other factors of production by an entrepreneur e.g. Will Shu. They spot the gap in the market and take risks in order to set up a business. The third factor of production is labour which is the physical and mental effort used by people to produce a good or service. The last factor of production is land which is all natural resources in the earth, sea and physical land e.g. fish, oil, diamonds, water.
Give examples of opportunity costs for: firms, individuals and governments.
An example of an opportunity cost is whether a firm is to produce tablet computers or laptops. An example of an opportunity cost for an individual is whether or not to buy a laptop, tablet or computer. An example of an opportunity cost for the government is whether or not to provide more schools or increase spending on defence.
Describe geographical mobility and it’s causes.
Geographical immobility refers to the barriers faced by resources moving from one area to another. It’s causes can be many things such as family and social ties, the financial costs involved in moving home include the costs of selling a house and removal expenses, the difference in house prices in different regions and the high cost of renting a property.
Describe occupational mobility and its causes.
Occupational immobility refers to the inability of resources to move easily between different jobs. It’s causes can be various things such as lack of education, lack of qualifications and lack of transferable skills.
Describe the returns to the factors of production.
In return for capital, households receive interest. The entrepreneur does this is return for profit. In return for labour, households receive wages. In return for providing land, households receive rent as a payment.
Describe reasons why people: borrow, spend and save.
Reasons people borrow are to buy assets, to consolidate debt, to cover unexpected costs and to cover day to day expenses. Reasons people spend are for a rainy day, to treat themself, financial protection, future spending and retirement. Things that people often spend on are food and drink, clothes, heating, leisure activities and transport.
What are different types of saving?
Cash ISAs (Individual Savings Accounts), instant access savings accounts, regular savings accounts, treasury bonds and premium bonds.
What are the advantages and disadvantages of a cash ISA?
The benefits of of a cash ISA is that you can earn interest tax-free up to a certain limit but the interest rates may decrease.
What are the advantages and disadvantages of an instant access savings account?
An advantage of an instant savings account is that you can access your money instantly but an disadvantage is that they have a lower interest rate.
What are the advantages and disadvantages of a regular savings account?
An advantage of a regular savings account is that there are good interest rates but a disadvantage is that if you don’t make monthly payments you could get penalised.
What are the advantages and disadvantages of a treasury bond?
An advantage of a treasury bond is that its easy you buy and can make good gifts especially for young people but a disadvantage is that there is no guaranteed return.
What are the advantages and disadvantages of a premium bond?
An advantage of a premium bond is that it has higher pay outs than a treasury bond and a disadvantage is that there is no guaranteed return.
What are the types of borrowing?
Types of borrowing are a mortgage, credit card, bank loan, overdraft, pay day loan and a higher purchase.
What is the impact of borrowing?
You are charged interest on your loans meaning that you have to pay more than you took out and every month after the agreed date that you don’t pay the loan back you get charged more.
Explain the impact on a person’s income, spending and saving of: a change in interest rates or a change in tax rates
If interest rates go up on your savings account that would be good as you would get more return but if interest rates go up for your spending account that would be bad because you would have to pay more money.
Explain the impact on a person’s income, spending and saving of a change in life circumstances, such as: redundancy, unemployment, increase in family size
If a person is made redundant or are facing unemployment that means that they are going to have to spend less until they get a new job because they will not have any income to support themself. If a person is facing an increase in family size they will have to cut costs and focus more on only buying needs because otherwise they may not have sufficient funds to support the new family member.
Describe what individuals can do to reduce uncertainties
They can save extra money so that if anything does happen they know that they have a certain amount of time that they will have money for to allow them to fix the issue that caused financial problems.
