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Prelim Economics > Exam 1 > Flashcards

Exam 1 Flashcards

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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
Examples of economic factors underlying [BUSINESS] PRODUCTION AND RESOURCE USE... (3)
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*
26
Examples of economic factors underlying [BUSINESS] INDUSTRIAL RELATIONS... (5)
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?
27
Economic factors underlying GOVT...
1. Have significant influence over business and consumers. | 2. Can encourage or discourage behaviour.
28
How governments can encourage behavior... (2)
1. Provide rebates/subsidies (30% tax rebate for ppl who get pvt health insurance) 2. Cut IR and increase govt spending to stimulate spending
29
How governments can DISCOURAGE behaviour.... (2)
1. Put taxes to make things more expensive... eg Cigarette tax. 2. Outlaw certain activities and fine people.... Eg un-competitive price matching...
30
Factors of production... (4)
1. Natural Resources - 'Land' 2. Labour 3. Capital 4. Enterprise
31
Reward for Labour...
wages
32
Reward for capital...
interest
33
Reward for Natural resources/land...
rent
34
reward for enterprise...
profit
35
Labour is....
Human effort
36
Availability and quality of labour resource can be influenced by... (5)
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
Higher labour costs cause...
more capital resources to be used.
38
Higher labour avaliable/ lower cost causes...
More labour and less capital resources to be used
39
FOP... Capital doesnt include...
Financial assets such as money, stocks, shares, bonds
40
Capital resources increase...
level of production from existing workforce and natural resources.
41
The amount of capital has...
a significant effect on future earning capacity of an economy.
42
When people save...
they shift resources to capital.
43
Owners earn intrests (very little)...
Borrowers pay interest... (lots).
44
``` Rewards for: Land Labour Capital Enterprise ```
Rent Wages Intrest Profit
45
Opportunity cost of buying capital equipment...
The interest the money would have earnt in a bank.
46
Enterprise...
involves organizing the other factors of production, to produce goods and services.
47
Enterprise is a....
vital ingredient for productive process.
48
Entrepreneurs make management descisions...
which have risk...
49
Good managerial decisions lead to...
success and profit $$$$$$$$$$
50
Bad managerial decisions lead to....
failure
51
Scarity of Natural resources is based on...
they can run out, eg fossil fuels, clean water
52
Scarity of labour based on...
pop size, skills, willingness to work
53
Scarity of capitol relates to...
Extent to which Govt/Firms will invest. | Level of savings available to invest.
54
Scarity of enterprise based on...
Ability and willingness to innovate and take risks. | Also cultural factors, pop size. etc.
55
GDP...
Gross domestic product... Total income received from production of G & S
56
Income is...
a reward for contribution to the production process.
57
Owners of {land, capital and enterprise skills} are paid based on....
The value of their input.
58
Workers are paid based on...
The value of their labour...
59
DEMAND & SCARITY determine prices... (2 examples)
Land in city ($$$$$) vs. Land in outback ($) | CEO skills - rare - highly paid for
60
Factors influencing an individuals wage... (4)
1. Hours worked. 2. Skills (common or rare) 3. Educational qualifications. 4. Bargaining power w/ employers
61
Pros of market economy... (money distribution) (2)
Work harder - get paid more - incentive. | Encourages innovation and tech advancement.`
62
Cons of market economy... (money distribution) (2)
Disadvantages those who cant contribute.... Eldery, disabled, sick
63
How governments can affect distribution of income.
Taxes - take from rich and give to poor (through welfare payments)
64
Money vs Bartering...
Money makes transactions easier. When only one party wants what the other has to offer.
65
ADVANTAGE of money over bartering...
Allows individuals to specialize.
66
Impacts of Boom (5)
1. Increased production of G & S 2. Rising investment and consumption. 3. Rising income 4. Rising quality of life 5. Falling unemployment
67
Impacts of RECESSION (5)
1. Falling production of G & S 2. Falling investment and consumption. 3. Falling income 4. Falling quality of life 5. Rising unemployment
68
Govt aim in Business cycle.
Aims to smooth it out. To ensure the economy can sustain growth for long periods.
69
Govt intervention during recession...
Increase spending and cut IRs
70
Govt intervention during boom...
Cut spending and increase IRs

Prelim Economics (7 decks)

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