FOP, PPC's, Economies, Division of labour & specialisation, margins- TB Flashcards
What is scarcity?
When demand for a resource is greater than supply as resources are limited
What is an economic good?
Goods that are scarce
What is a free good?
Good that aren’t regarded as scarce (sea water)
What are wants and what are needs?
Wants= Non-essential desires
Needs= Things essential for human survival
What are the 3 economic agents?
Households (individuals), government and firms/ businesses
What is rationality?
Economic agents acting in their best interests
What is utility?
The benefit derived from the consumption of a good or service
What are the 4 factors of production?
Land, Labour, Capital and Enterprise
What are the rewards for each factor of production?
Land= rent
Labour= wages
Capital= interest
Enterprise= profit
What is a positive statement?
A statement about what IS
What is a normative statement?
A statement involving a value judgement about what OUGHT TO BE
What is a value judgement?
A statement based on your opinions/ beliefs rather than facts
What is a trade-off?
Exchange something of value, especially as part of a compromise
What is opportunity cost?
The loss of other alternatives when one alternative is chosen
What does a PPC show?
The maximum amount of two economic goods that can be produced using the same amount of materials
What could cause a shift outwards in a PPC curve?
Improved technology, improved quality or quantity of any FOP
What could cause a shift inwards in a PPC curve?
Natural disaster, worsened quality or quantity of any FOP
What is a market economy?
Where market forces are allowed to guide the allocation of resource within a society (e.g. Taiwan)
What is a centrally planned economy?
Where the government guides resource allocation within a society (e.g. North Korea)
What is a mixed economy?
Where a combination of market forces and government guides the allocation of resources within a society
What is the invisible hand?
A term from Alan Smith to describe the way that resources are allocated in a market economy
What is specialisation?
Concentrating on a task or activity in order to become an expert in it- more efficient and beneficial for economic agents
What is the division of labour?
Where the production is broken down into a sequence of stages and workers are assigned specific stages
What is a barter system?
An economy without money so that transactions in goods and services rely on direct exchange
What is money a medium of?
Exchange
3 Specialisation advantages?
1) More everything (profit, pay, output etc.)
2) Tackles scarcity
3) Allows trade
3 Specialisation disadvantages?
1) Dull for workers
2) Inflexibility
3) Dangerous for countries (overspecialisation)
What is marginal utility?
Additional utility gained from consuming one extra unit of a good or service
What is the law of diminishing utility?
The more units consumed, the less utility gained from them
What are 3 reasons the marginal concept is useful in decision making?
1) Allows gvnmt to make incremental improvements to spending decisions
2) Allows firms to decide when to stop increasing production
3) Allows households to decide when to stop consumption and when to offer more labour
What are 3 reasons the marginal concept isn’t useful in decision making?
1) Gvnmt need to make large changes too
2) Firms are unlikely to have the info needed to calculate values ex ante, so only can ex post
3) Households don’t have knowledge to process these decisions
What does 1) ‘ex ante’ & 2) ‘ex post’ mean?
1) Before decision
2) After decision
