Intodruction To Econmoics Flashcards

1
Q

What is a positive statement

A

A statement that is testable by data

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2
Q

What is a normative statement

A

A statement that is opinionated or concerned with someone’s judgement

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3
Q

What is opportunity cost

A

The benefit lost from the next best alternative

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4
Q

Example of consumer opportunity cost

A

The OC of a large chips is 3 chocolate bars

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5
Q

Example of producer opportunity cost

A

The opportunity cost to produce 3 jumpers is the same as a pair of shoes

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6
Q

Example of government opportunity cost

A

The opportunity cost to build 3 new schools is the same as running a hospital for a year

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7
Q

What is an economy

A

A system that works to solve the economic problem

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8
Q

What is the general economic problem

A

What is to be produced
How should it be produced
For whom is production taking place

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9
Q

What are the 4 main types of resources

A

Land
Labour
Capital
Enterprise

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10
Q

What are renewable resources

A

Is one that can be used repeatably and does not run out as it is naturally replaced

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11
Q

What are free goods

A

Goods that have no opportunity cost upon consumption/ production

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12
Q

What are economic goods

A

Goods and services that are scarce because using those resources means they cannot be used elsewhere

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13
Q

What is productive efficiency

A

Maximised output/ happiness

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14
Q

Allocative efficiency

A

Fully using resources but not in the most efficient way

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15
Q

What is economic growth

A

A rise in a countries productive capacity causes the PPF to shift outwards. This allows an increase in supply and goods

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16
Q

What are capital goods

A

Goods that are used to make consumer goods and services

E.g

17
Q

What are consumer goods

A

Goods and services that satisfy costumer wants directly

18
Q

What is an investment

A

Spending on capital goods

19
Q

What causes outwards shift in PPF

A

More land - more area to produce consumer goods
Education - invention of new products
Machinery - more output ( faster)
High land production - increases output

20
Q

Causes of inwards shifts of the nations PPF

A

Natural disaster
Civil war
Outwards labour migrations due to the drain of skilled workers
Decline in productivity of labourers

21
Q

Production

A

Is a measure of the value of the outputs of goods and services

22
Q

Productivity

A

A measure of the efficiency of factors of production.

Measure by output per person (hour)

23
Q

What is the division of labour

A

The assignment of different parts of a manufacturing process or task to different people in order to improve efficiency

24
Q

What is specialisation

A

The process of concentrating and becoming an expert in a particular field

25
What is a market
A place where buyers and sellers can meet to facilitate exchange of goods or services
26
3 ways division of labour increases productivity
People work faster when they can focus on one job ( no movement down a production line) People learn to perfect the task Increase in productivity = more products which decreases scarcity
27
Advantages of specialisation
Higher output More variety for costumers Bigger market Competition which = lower prices
28
What is a free market
Competition Limited government intervention Motivation and self interest
29
Command market
No competition Lots of government intervention Producers aims are to meet production targets Resources are allocated by the state
30
Disadvantages of specialisation
- repetition creates boredom, high turnover in staff and therefore training costs - breaking down production makes it easier for a machine to replace workers - specialisation creates interdependence, meaning if one area fails the whole production is stopped
31
Functions of money
Medium of exchange Measure of value Store of value Method of deferred payment
32
Advantages of free market
Competition means that firms have to try and keep production costs down Firms constantly trying to improve Quality of products Move variety for choices Financial incentives
33
Disadvantages of a free market
- monopolies may form, rivals get taken over - inequality - external costs and benefits are ignored - information gaps - insufficient quantity of public goods and merit goods - erratic swings in business cycle
34
Advantages of command economy
- cooperation between firms leads to high level of output - reduction in inequality - government limit external costs - government fund public goods such as defence - government has more control over the economy, smaller swings in business cycle
35
Disadvantages of command economy
- price mechanism cannot operate - lack of competition, low productivity, low quality of products, less choice, - lack of financial incentives, management do not take risks for profits, labours do not work hard