Introduction to Economics (Theme 1) Flashcards
What does Cetris Paribus ?
All other things being equal, remaining the same
What is a normative statements ?
Those which value is based and involve opinions
What is a positive statement ?
A statement which can supported with evidence and facts.
The 4 factors of production ?
Land
Labour
Enterprise
Capital
What is Production Possibility Frontier ?
Capital goods, are the machinery that assists (makes)in making the consumer goods
Consumer goods- good which are used by the public, civilians
PPF-it is the combinations of goods which can be produced if all resources are utilised
Production Possibility Frontier
A curve on a graph that illustrates the possible quantities that can be produced of two products, if both products depend on the same finite resource.
Consequences of producing too much capital goods ?
It would result in too much machinery that would not be needed, as the finite recourse would have been used to produce such machinery rather than the consumer goods.
What are the consequences of producing too much consumer goods?
It would result in there not being enough machineries being able to match the amount consumer goods that are being produced, therefore it would run out of consumer goods
What are the consequences of producing too much consumer goods?
It would result in there not being enough machineries being able to match the amount consumer goods that are being produced, therefore it would run out of consumer goods
What is specialisation of labour ?
When an individual company, or country focuses their resources of which they have, and their labour, on a specific type of production or skill to increase efficiency in this certain area.
Disadvantages of specialisation
It means if certain job is left vacant- very hard to replace such specialised job
Individuals- might get bored of one job for their life
The lack of a multiple skill set, only have the ability to do this one job
Not able to switch careers in companies
Also might expect higher wages for a single job
Advantages of specialisation
It reduces the cost of having to train workers because they only have to be qualified on one particular job
They can maximise efficiency on particular job- since it’s what they are good at
What is absolute advantage?
Being able to produce more of something than another country, this is assuming that both have the same resources
What is Comparative advantage ?
Being able to produce more of something at a much lower opportunity cost than another country, again assuming all factors of production are equal.
Opportunity cost equation
It’s the opposite to what you want so if it’s opportunity cost of furniture, to biscuits it’s biscuits divided by furniture
Reason for division of labour
It means multiple skills can be done in one company
Problem for division of labour
Decreases concentration and specialisation in particular teams,
What are heterodox economists
These are economics that advocate theories assumptions or methods that may be radically different than those used in mainstream economics
What is Flat Tax ? (Ad Valorem Tax)
It is imposed on firms, but can be passed onto customers through higher prices- key example VAT
What is regressive tax ?
This is a tax that affects poor working class people than it will benefit them.
What is consumer Surplus ?
The difference amount between the total amount of money the customers were willing to pay and what they actually paid.
What is producer surplus ?
The amount that the producer is willing to supply and the actually amount they receive.
Below the normal equilibrium
What is the basic economic problem?
There are unlimited needs and wants
Problems of scarcity
Limited Resources
What are the three economic questions ?
What to produce
How to produce it
For whom to produce it
