Intodruction To Econmoics

Question 1

What is a positive statement

Answer 1

A statement that is testable by data

Question 2

What is a normative statement

Answer 2

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

Question 3

What is opportunity cost

Answer 3

The benefit lost from the next best alternative

Question 4

Example of consumer opportunity cost

Answer 4

The OC of a large chips is 3 chocolate bars

Question 5

Example of producer opportunity cost

Answer 5

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

Question 6

Example of government opportunity cost

Answer 6

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

Question 7

What is an economy

Answer 7

A system that works to solve the economic problem

Question 8

What is the general economic problem

Answer 8

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

Question 9

What are the 4 main types of resources

Answer 9

Land
Labour
Capital
Enterprise

Question 10

What are renewable resources

Answer 10

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

Question 11

What are free goods

Answer 11

Goods that have no opportunity cost upon consumption/ production

Question 12

What are economic goods

Answer 12

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

Question 13

What is productive efficiency

Answer 13

Maximised output/ happiness

Question 14

Allocative efficiency

Answer 14

Fully using resources but not in the most efficient way

Question 15

What is economic growth

Answer 15

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

Question 16

What are capital goods

Answer 16

Goods that are used to make consumer goods and services

E.g

Question 17

What are consumer goods

Answer 17

Goods and services that satisfy costumer wants directly

Question 18

What is an investment

Answer 18

Spending on capital goods

Question 19

What causes outwards shift in PPF

Answer 19

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

Question 20

Causes of inwards shifts of the nations PPF

Answer 20

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

Question 21

Production

Answer 21

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

Question 22

Productivity

Answer 22

A measure of the efficiency of factors of production.

Measure by output per person (hour)

Question 23

What is the division of labour

Answer 23

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

Question 24

What is specialisation

Answer 24

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

Question 25

What is a market

Answer 25

A place where buyers and sellers can meet to facilitate exchange of goods or services

Question 26

3 ways division of labour increases productivity

Answer 26

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

Question 27

Advantages of specialisation

Answer 27

Higher output More variety for costumers Bigger market Competition which = lower prices

Question 28

What is a free market

Answer 28

Competition Limited government intervention Motivation and self interest

Question 29

Command market

Answer 29

No competition Lots of government intervention Producers aims are to meet production targets Resources are allocated by the state

Question 30

Disadvantages of specialisation

Answer 30

- 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

Question 31

Functions of money

Answer 31

Medium of exchange Measure of value Store of value Method of deferred payment

Question 32

Advantages of free market

Answer 32

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

Question 33

Disadvantages of a free market

Answer 33

- 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

Question 34

Advantages of command economy

Answer 34

- 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

Question 35

Disadvantages of command economy

Answer 35

- 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