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A-Level Economics > Intro To Microeconomics > Flashcards

Intro To Microeconomics Flashcards

1
Q

Interest Rate

A

Cost of borrowing money
Return on saving

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2
Q

Inflation

A

Sustained rise in general price level

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3
Q

Disinflation

A

Sustained fall in general price level

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4
Q

Economics

A

Question of Scarcity
The allocation of limited resources for unlimited wants

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5
Q

‘Need’

A

Essential
e.g. water, food, clothes, shelter

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6
Q

Moral Hazard

A

Person takes more risks as someone else bears the cost of those risks

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7
Q

Economic Problem

A

Problem of Scarcity
-How to best use limited resources to satisfy the unlimited wants of people
-How to best allocate scarce resources among alternative uses
-Relates to infinite wants and finite resources

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8
Q

Opportunity Cost

A

The next best alternative being given up

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9
Q

Allocation of Resources

A

Choice between different uses of resources
Samuelson’s 3 Question’s ; What?, Who?, How?

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10
Q

Macroeconomics

A

Entire economy
All businesses
All consumers

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11
Q

Microeconomics

A

Individual firms
Industry’s Individual consumers

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12
Q

Free Goods

A

Goods with infinite supply and zero opportunity cost
e.g. air, sea, sunlight, rainwater

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13
Q

Economic Goods

A

Scarce and an opportunity cost
e.g. any goods and services sold in a market

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14
Q

Normative Statements

A

Opinionated statements, subjective, value judgements

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15
Q

Normative Statements

A

Opinionated statements, subjective, value judgements

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16
Q

Positive Statements

A

Factual, Can be tested and proven

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17
Q

Sustainability

A

Requires an economy to be able to o achieve growth now without hampering the ability to grow in the future

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18
Q

3 Types of Sustainability

A

Social
Environmental
Economic

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19
Q

‘Ceterus Paribus’

A

Assumption that all other things being equal / remaining a constant, Control variable, used for simplifying economic relationships

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20
Q

Consumers assumed to…

A

Maximise their satisfaction

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21
Q

Producers / Firms are expected to…

A

maximise profits

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22
Q

Governments are supposed to…

A

Represent the people and act in their best interests (social welfare)

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23
Q

Interdependence

A

This means the economic actions of one group are likely to impact another

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24
Q

Factors of Production

A

The resources used by firms to produce goods + services

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25
Q

Resources

A

CELL
Capital
Enterprise
Land
Labour

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26
Q

‘Land’

A

The natural resources available for production in an economy
Reward is ‘rent’

27
Q

Labour

A

Human services (Human Capital), (Physical or intellectual)

28
Q

Enterprise

A

Involves taking a risk and organising the other 3 factors of production to create the final goods and services

29
Q

Capital

A

Human made resources used to make other goods and services

30
Q

Types of capital

A

MERC
Machinery
Equipment
Robots
Computers

31
Q

Externalities

A

The costs and benefits to a third party created by economic agents when undertaking their activities

32
Q

Market Mechanism

A

Where decisions on price and quantity are based on supply and demand

33
Q

3 Conditions needed for a market:

A

Individual buyers and sellers
Act on reference to their self interests
Prices convey info to buyers and sellers

34
Q

Demerit Good

A

Something deemed to be bad for society but it’s over-provided by the market

35
Q

How long does it take for the impact of a decrease in interest rates to occur?

A

9-12 months to effect an economy
18-24 months to effect inflation

36
Q

Consumer Sovereignty

A

The impact/influence consumers have on producers

37
Q

Pure Monopolist

A

Single seller in a market which supplies market with 100% of the products

38
Q

Legal Monopolist

A

Single seller with a 25+ % market share

39
Q

Merit Goods

A

Goods & Services which are deemed to be good/benefical for society but often underprovided

40
Q

Price Mechanism is

A

The forces of supply and demand to allocate resourcea and determine prices in a market economy

41
Q

Price Mechanism’s Functions are

A

Allocation
Rationing
Signalling
Incentives

42
Q

Factors of Production / Resources / Factor Input

A

C apital
E nterprise
L and
L abour

43
Q

Transition Economies

A

Previously a command / planned economy but now allowing more price mechanism to occur

44
Q

Advantages of Planned Economy

A

-Lower inequality than free market
-Prevent monopoly abuse

45
Q

Disadvantages of Planned Economy

A

-Lack of choice of products
-Less income after tax
-Inefficient allocation of resources
-Less incentive to work

46
Q

Advantages of Free Market Economy

A

-Higher income after tax
-Incentive to inovate, high quality
-Lower prices
-Higher economic growth

47
Q

Disadvantages of Free Market Economy

A

-Businesses can exploit customers
-Market dominated by few businesses, monoply’s
-Higher inequality than planned and mixed

48
Q

Measure Economic Freedom through:

A

Rule of Law
Limited Government
Regulatory Efficiency
Open Markets

49
Q

Price Mechanism, Signalling

A

Prices adjust up or down to demonstrate where resources are required and where they are not

50
Q

Price Mechanism, Allocation

A

Changing market prices allocate scarce resources among competing uses

51
Q

Price Mechanism, Rationing

A

Higher market prices serve to ration scarce resources when market demand outstrips supply

52
Q

Price Mechanism, Incentives

A

When the price of a product rises, quantity supplied increases as businesses respond

53
Q

Different Economic Agents

A

Households
Firms
Governments

54
Q

Households Objective

A

They wish to maximise their utility or personal satisfaction in consumption or working

55
Q

Firms Objective

A

Maximise Profits, growth, sales or profit satisficing

56
Q

Governments Objective

A

Maximise the welfare of the population, Full employment, Sustainable ecnomic growth, competitive marketplace

57
Q

Profit Satisficing

A

A level of profit below profit maximisation that satisfies the needs of the owners of organisation

58
Q

Production Possibilty Curve (PPC)

A

Shows the maximum output combinations of Consumer + Capital goods that an economy can possibly produce given existing resources and technology.

59
Q

PPC Illustrates

A

-Opputunity cost
-Concepts of Scarcity
-Economic goods not being perfectly adaptable
-Unemployment if Shift

60
Q

Recession

A

Fall in real GDP for two conescutive quarters

61
Q

Market Failure

A

When the free market mechanism fails to achieve allocative efficiency

62
Q

PPC’s concave shape

A

displays theory of diminishing returns

63
Q

PPC / PPF can shift outward because

A

-New technology / innovations
-Discovery of new resoursers
-Improved training / education / healthcare

64
Q
A

A-Level Economics (2 decks)

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