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Economics - Year 11 > Introduction To Economics > Flashcards

Introduction To Economics Flashcards

1
Q

The Economic Problem

A

how to satisfy unlimited needs and wants with scarce or limited resources

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2
Q

Needs

A

goods and services that are essential for survival (food, shelter, clothing, healthcare

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3
Q

Wants

A

the material desires of individuals that provide satisfaction when consumed

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4
Q

Opportunity Cost

A

What is sacrificed/What is gained

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5
Q

PPF four key assumptions

A

The economy only produces two goods

The state of technology remains constant

The quantity of resources remains unchanged

All resources are fully employed

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6
Q

Production of Capital Goods =

A

Increased Future Output

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7
Q

Production of Consumer Goods =

A

Decreased Future Output

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8
Q

Consumer goods

A

goods that satisfy consumer demands immediately

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9
Q

Capital Goods

A

goods that will increase productive capacity in the future

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10
Q

Resources

A

anything that can be used to produce a good or provide a service

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11
Q

Land

A

all natural resources, living and non-living. Reward = Rent

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12
Q

Labour

A

all forms of human effort used in the production process. Reward = Wages

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13
Q

Capital

A

all manufactured goods used in the production process. Reward = Interest

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14
Q

Enterprise

A

the ability to combine the FOP to produces a good or service, carried out by entrepreneurs. Reward = Profit

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15
Q

Gross Domestic Product

A

total amount of goods and services produced in a society

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16
Q

Advantages of a Market Economy

A

provides incentives for people to obtain better skills and work harder

17
Q

Disadvantages of a Market Economy

A

unfair for those who are unable to contribute to production due to illness, age or disability

18
Q

Money

A

a medium for exchanging goods & services

19
Q

Bartering

A

The non-cash exchange of goods and services

20
Q

The Business Cycle

A

the fluctuations in the level of growth in an economy over a period of time

21
Q

Stages of the Business Cycle

A

Upswing/Expansion

Boom/Peak

Downswing/Contraction

Recession/Trough

22
Q

Quality of Life is measured by

A

Income

Health

Education Levels

Consumer Goods

Leisure Time

23
Q

The Five Sectors of the Circular Flow of Income

A

Households

Businesses

Financial

Government

International

24
Q

Leakage

A

A withdrawal of money from the circular flow - decreases economic activity (savings, taxation, imports)

25
Q

Injection

A

the addition of money to the circular flow - increases economic activity (investment, government spending, exports)

26
Q

Equilibrium

A

a situation in the economy when there is no tendency to change

27
Q

When does equilibrium occur?

A

Equilibrium occurs when leakages are equal to injections: S+T+M=I+G+X

28
Q

Economic System

A

The way in which a country organises the production of its goods & services, the allocation of resources and the distribution of income

29
Q

Questions that Determine the Economic System

A

What to produce?

How much to produce?

How to produce?

For whom to produce?

30
Q

Types of Economic Systems

A

Market Economy

Planned Economy

Mixed Market Economy

31
Q

Characteristics of a Market Economy

A

Individuals and businesses make all the economic decisions

There is minimal or no government involvement

The “price mechanism” (supply & demand) determines the price and quantity of goods & services

Businesses decisions are driven by the “profit motive”

Consumer decisions are driven by self-interest

Resources are privately owned - the owners of the resources receive income

32
Q

Characteristics of a Planned Economy

A

The “state” (government) makes the major economic decisions

Central planning authorities determine the types of goods produced, quantity and price by setting output targets

There is public ownership of resources which are allocated by the government

Majority of businesses are state-owned

Limited economic freedom for businesses and individuals

33
Q

Characteristics of a Mixed Market Economy

A

A mixed market economy is one where the decisions concerning production and distribution are made by a combination of market forces and government decisions

Individuals and businesses make most of the economic decisions

34
Q

How does the government intervene in a market economy?

A

Regulates some of the economic decisions of businesses and consumers

Provides collective goods & services

Redistributes income through taxation & transfer payments

Stabilises economic activity

Economics - Year 11 (6 decks)

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