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Prelim Economics > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

A Resource can be defined as…

A

Anything that can be used to produce goods & services.

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2
Q

Scarcity arises because…

A

Wants are unlimited by resources are limited.

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3
Q

Characteristics of wants.. (4)

A
  1. Unlimited
  2. Change over time
  3. Differ in importance
  4. Must be chosen between.
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4
Q

The key economic issues (4 questions)

A

What to produce?
How much to produce?
How to produce?
How to distribute production?

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5
Q

Opportunity cost…

A

The next best alternative forgone when an economic decision is made.

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6
Q

Production is…

A

Any activity undertaken to satisfy the wants of humans.

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7
Q

A production possibility frontier shows how…

A

Opportunity cost arises when individuals/society make choices.

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8
Q

PPFs are based of 5 assumptions…

A
  1. Economy only produces 2 goods.
  2. Technology is constant.
  3. Resources amount is unchanged.
  4. All resources are fully employed.
  5. Resources are interchangeable between outputs.
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9
Q

Ways a PPF can be expanded.(2)

A
  1. Increased efficiency (eg Technological advancement).

2. Aquire more resources.

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10
Q

If a PPF expands…

A

Economic growth will have taken place.

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11
Q

Way a PPF can achieve lower.

A

Underemployment of resources (physical or human).

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12
Q

Consumer goods….

A

Instant gratification.

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13
Q

Capitol Goods…

A

Produced means of production.

Contribute to economic growth.

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14
Q

Future implications of consumer goods…

A

At the expense of investment.
Reduced capacity to produce in the future.
Constrains future consumption.

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15
Q

Invest/Create Capitol goods now…

A

Increased productive capacity in the future.
More economic growth.
More consumption in future.

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16
Q

Factors underlying economic descision making.

Individuals choose between…

A

Spending and saving

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17
Q

Individuals decision making could be based on… (5 with examples)

A
  1. Age - young and dumb?
  2. Income - lots to spend or little left over?
  3. Expectations - Economy rise or fall?
  4. Family Circumstances - Family?
  5. Future plans - Retire? Further education?
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18
Q

Economic decision making underlying FURTHER EDUCATION

A

Foregone income and educational costs —> Higher paying job

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19
Q

Economic decision making underlying START A FAMILY

A

Cut spending - one partner go without income

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20
Q

Economic decision making underlying RETIRE

A

Enough money for a comfortable life? Adjust to lower income but more chance to consume.

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21
Q

Economic decision making underlying POLITICAL VOTING

A

Will Govt cause unemployment and inflation? - Bad for individuals.

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22
Q

Factors of production… (4)

A

Land.
Labour.
Capitol.
Enterprise.

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23
Q

Businesses face decisions in 3 areas…

A
  1. Pricing
  2. Production and Resource use
  3. Industrial Relations
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24
Q

Economic factor underlying PRICING… (3)

A

Price high and sell a few less? or
Price low and sell much more?
Marketing Strategy - Exclusive group or mass market?

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25
Q

Examples of economic factors underlying [BUSINESS] PRODUCTION AND RESOURCE USE… (3)

A
  1. Better quality (more expensive) equipment - that runs longer?
  2. Cheapest resources, or pay more for a more reliable supply?
  3. Ethical issues… pay more for recycled paper?
    * AIM TO MINIMISE COSTS*
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26
Q

Examples of economic factors underlying [BUSINESS] INDUSTRIAL RELATIONS… (5)

A

1.High unemployment - employers have more power.
2. Low unemployment - employees have more power
(unemployment = business power)
3. Industry set wage, or negotiate with staff directly??
4. Encourage union representation?
5. Employees involved in decision making?

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27
Q

Economic factors underlying GOVT…

A
  1. Have significant influence over business and consumers.

2. Can encourage or discourage behaviour.

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28
Q

How governments can encourage behavior… (2)

A
  1. Provide rebates/subsidies (30% tax rebate for ppl who get pvt health insurance)
  2. Cut IR and increase govt spending to stimulate spending
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29
Q

How governments can DISCOURAGE behaviour…. (2)

A
  1. Put taxes to make things more expensive… eg Cigarette tax.
  2. Outlaw certain activities and fine people…. Eg un-competitive price matching…
30
Q

Factors of production… (4)

A
  1. Natural Resources - ‘Land’
  2. Labour
  3. Capital
  4. Enterprise
31
Q

Reward for Labour…

32
Q

Reward for capital…

33
Q

Reward for Natural resources/land…

34
Q

reward for enterprise…

35
Q

Labour is….

A

Human effort

36
Q

Availability and quality of labour resource can be influenced by… (5)

A
  1. Educational standards, leaving school age
  2. Population size
  3. Retirement age
  4. Availability of childcare, etc
  5. Social attitudes to women in the workforce.
37
Q

Higher labour costs cause…

A

more capital resources to be used.

38
Q

Higher labour avaliable/ lower cost causes…

A

More labour and less capital resources to be used

39
Q

FOP… Capital doesnt include…

A

Financial assets such as money, stocks, shares, bonds

40
Q

Capital resources increase…

A

level of production from existing workforce and natural resources.

41
Q

The amount of capital has…

A

a significant effect on future earning capacity of an economy.

42
Q

When people save…

A

they shift resources to capital.

43
Q

Owners earn intrests (very little)…

A

Borrowers pay interest… (lots).

44
Q 
Rewards for:
Land
Labour
Capital
Enterprise
A

Rent
Wages
Intrest
Profit

45
Q

Opportunity cost of buying capital equipment…

A

The interest the money would have earnt in a bank.

46
Q

Enterprise…

A

involves organizing the other factors of production, to produce goods and services.

47
Q

Enterprise is a….

A

vital ingredient for productive process.

48
Q

Entrepreneurs make management descisions…

A

which have risk…

49
Q

Good managerial decisions lead to…

A

success and profit $$$$$$$$$$

50
Q

Bad managerial decisions lead to….

51
Q

Scarity of Natural resources is based on…

A

they can run out, eg fossil fuels, clean water

52
Q

Scarity of labour based on…

A

pop size, skills, willingness to work

53
Q

Scarity of capitol relates to…

A

Extent to which Govt/Firms will invest.

Level of savings available to invest.

54
Q

Scarity of enterprise based on…

A

Ability and willingness to innovate and take risks.

Also cultural factors, pop size. etc.

55
Q

GDP…

A

Gross domestic product… Total income received from production of G & S

56
Q

Income is…

A

a reward for contribution to the production process.

57
Q

Owners of {land, capital and enterprise skills} are paid based on….

A

The value of their input.

58
Q

Workers are paid based on…

A

The value of their labour…

59
Q

DEMAND & SCARITY determine prices… (2 examples)

A

Land in city ($$$$$) vs. Land in outback ($)

CEO skills - rare - highly paid for

60
Q

Factors influencing an individuals wage… (4)

A
  1. Hours worked.
  2. Skills (common or rare)
  3. Educational qualifications.
  4. Bargaining power w/ employers
61
Q

Pros of market economy… (money distribution) (2)

A

Work harder - get paid more - incentive.

Encourages innovation and tech advancement.`

62
Q

Cons of market economy… (money distribution) (2)

A

Disadvantages those who cant contribute…. Eldery, disabled, sick

63
Q

How governments can affect distribution of income.

A

Taxes - take from rich and give to poor (through welfare payments)

64
Q

Money vs Bartering…

A

Money makes transactions easier. When only one party wants what the other has to offer.

65
Q

ADVANTAGE of money over bartering…

A

Allows individuals to specialize.

66
Q

Impacts of Boom (5)

A
  1. Increased production of G & S
  2. Rising investment and consumption.
  3. Rising income
  4. Rising quality of life
  5. Falling unemployment
67
Q

Impacts of RECESSION (5)

A
  1. Falling production of G & S
  2. Falling investment and consumption.
  3. Falling income
  4. Falling quality of life
  5. Rising unemployment
68
Q

Govt aim in Business cycle.

A

Aims to smooth it out. To ensure the economy can sustain growth for long periods.

69
Q

Govt intervention during recession…

A

Increase spending and cut IRs

70
Q

Govt intervention during boom…

A

Cut spending and increase IRs

Prelim Economics (7 decks)

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