Exam semester 1&2 Flashcards
What is economics?
The study of human behaviour of how we use our scarce recourses to meet our wants and needs. Limited resources, unlimited wants
Define Land:
Natural resources
Define Labour:
mental or physical effort
Define Capital:
equipment used to produce final goods and services
Define Enterprise:
the manager. They choose how much land, labour and capital is used
What are economic systems?
an economic system describes how a countries economy is organised. Every country needs a system to determine how to use its productive resources
Name the 4 economic systems:
What are the characteristics of a traditional economy?
economic decisions are based on customs and beliefs. People will make what they always made and will do the same work their parents did
Name the 4 economic systems:
What are the characteristics of a Command economy?
- government makes all economic decisions and owns most of the property.
- Determine prices of goods/services and the wages of workers
- This system has not been very successful
Name the 4 economic systems:
What are the characteristics of a Market economy?
- economic decisions are guided by the changes in prices that occur as individual buyers and seller interact in the marketplace.
- Most of the resources are owned by private citizens
- Based off free enterprise
Name the 4 economic systems:
What are the characteristics of a Mixed economy?
market and command = mixed. There are no pure command and market economies. To some degree, all modern economies exhibit characteristic of both systems and are often referred to as mixed economies
What is the law of supply?
when the price (cost) of a good increased then a firm will increase supply
What are factors that effect supply?
Price, Number of suppliers, Legislation- bans, Tax, Resources (L, L, C, E) – cost of production, Weather/climate, Technology
What is the Law of demand
when a price of a good increases then demand will decrease
What are factors that effect demand?
Announcements, Availability of credits, Substitutes + complimentary, Seasons- agriculture, Preferences, Population, Tastes, Demographics, Disposable income
explain equilibrium in relation to supply and demand
The price at which supply equals demand for a product, when supply and demand curves intersect
what is a competitive market?
A competitive market is one where there are numerous producers that compete with one another in hopes to provide goods and services we, as consumers, want and need. In other words, not one single producer can dictate the market.
what is a non-competitive market?
A market is not competitive when the agents acting in such a market have the power to influence the price, directly or indirectly, something that does not occur under perfect competition.
what is perfect competition?
perfect competition occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barrier, buyers have “perfect” or full information, and companies cannot determine prices.
what are price factors?
The unit cost of using a factor of production, such as labour or physical capital
what are non-price factors?
Increase in income, Decrease in income, Price of substitutes, Price of complimentary goods, Tastes and preferences, Future expectations
define substitutes:
something that takes the place of another thing
define complimentary:
combining to enhance or emphasize the qualities of each other or another
Types of demand:
- what is individual demand?
influenced by an individual’s age, sex, income, habits, expectations and the prices of competing goods in the marketplace
Types of demand:
- what is marketdemand?
the same factors as individual except it’s the expectations of a community and so on
Types of markets:
what is the factor and product market?
Factor market: where factors of production are bought and sold e.g., raw materials, steel, metal, plastic
Product market: the product market is the marketplace where final goods or services are sold to businesses and the public sector
what is efficiency
The production of goods and services that society wants at the lowest possible cost
what is market efficiency?
Market efficiency: all resources are being used effectively
what is technical efficiency?
Technical efficiency: producing goods and services at the lowest possible cost e.g., robots
what is allocative efficiency?
Allocative efficiency: resources are being used to make the products that people want. When the value consumers place on a good or service equals or exceeds the cost of the resources used up in productio
what is dynamic efficiency?
Dynamic efficiency: able to adapt to change relatively easily and at lowest cost. Implementing better work practices
what is consumer surplus?
The difference between maximum price consumers is willing to pay vs what they pay
what is producer surplus?
The difference between what the producer is willing to receive vs what they receive
what is total surplus?
The value of the consumer surplus + the producer surplus
what is dead weight loss?
Market inefficiency. The decrease in total surplus that results from an inefficient allocation of resources