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OCR Alevel Economics > Introduction To Microeconomics > Flashcards

Introduction To Microeconomics Flashcards

1
Q

What is scarcity

A

Basic economic problem based on the fact that there are limited resources to satisfy those wants and needs

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2
Q

What is a free good and what is an economic good

A

Free good- no scarcity
Economic good- scarcity attatched

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3
Q

What are the factors of production

A

Capital
Enterprise
Land
Labour

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4
Q

Explain what entails of the factors of production

A

Capital- physical assets or man made resources used in production

Enterprise- ability and willingness to organize, coordinate and take risks in production process

Labour- physical and mental effort exerted by individuals in production process

Land- all natural resources used in production. Fixed factor

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5
Q

3 main economic agents

A

Consumers
Producers
Government

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6
Q

What are positive statements

A

Objective statements that cab be tested, amended or rejected by referring to available evidence

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7
Q

What are normative statements

A

A value judgment is a subjective statement of opinion rather than a fact that can be tested by looking at available evidence

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8
Q

Factors of production, reward/incentives

A

C- interest from the investment
E- profit (an incentive to take risks)
L-wages
L-Rent

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9
Q

What does Incentive mean

A

when something motivates an individual to make a decision and act a certain way.

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10
Q

What is resource allocation

A

How resources are distributed among producers and goods and services are distributed among customers

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11
Q

What Is a market economy

A

An economy where market mechanism allocates resources so customers make decisions about what is produced

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12
Q

Planned economy

A

CELL are allocated by the state, so they decide what, how and for whom to produce goods

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13
Q

Economic efficiency

A

Resources are allocated optimally, so every customer benefits and waste is minimised

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14
Q

Productive efficiency

A

MC=AC
Optimum level of output is produced using all resources avaliable in the economy

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15
Q

Allocation efficiency

A

P=MC
Distributing and assigning resources a firm has available in the most effective way

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16
Q

What is a mixed economy

A

both free market mechanism and government allocate resources

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17
Q

what are the advantages of a market economy

A

More of an incentive for firms to be efficient as they have to provide G&S demanded by consumers.
likely to lower their average costs and make better use of resources. ↑ overall output of economy
- Bureaucracy for gov intervention avoided
- some economist argue some freedom gained from free economy leads to ↑ personal freedom.

18
Q

What are the disadvantages of a market economy

A

-free market increases inequality and benefits the wealthy.
-could ↑ monopolies
-overconsumption of demerit goods which have negative externalities.(tobacco)
- public goods such as national defense is not provided.
- merit goods are underprovided(education)

19
Q

what are the advantage of planned economy

A
  • May be easier to coordinate resources in times of crisis.
  • Gov can compensate for market failure by reallocation resources.
  • inequality in society could be ↓
    -prevent abuse of monopoly power.
20
Q

What are the disadvantages of planned economy

A
  • Gov and markets fail and they may not be informed what to produce
    -limits democracy and personal freedom
  • may not meet consumers preferences
21
Q

Division of labour

A

Where the production process is broken down into stages and workers are assigned different tasks

22
Q

Demand

A

The amount of goods and services consumers are willing and able to purchase at a given price in a given time

23
Q

Supply

A

The quantity of goods and services producers are willing and able to produce at a given price in a given time

24
Q

Specialisation

A

Where an individual worker, firm, region, or country produces a limited range of goods or services

25
Q

What is individual demand

A

the demand for a product by a consumer

26
Q

what is market demand

A

the demand for a product by all consumers in a market

27
Q

what is competitive demand

A

demand for goods that are in competition with each other

28
Q

what is composite demand

A

demand for good that has multiple uses

29
Q

what is joint demand

A

goods which are interdependent/ demanded together.

30
Q

What is individual supply

A

supply for a product by one producer

31
Q

what is market supply

A

supply for a product by all producers in a market

32
Q

what is joint supply

A

hen a firm produces more than one product together

33
Q

what is competitive supply

A

a firm can use its’ resources to produce more than one product

34
Q

What causes a shift in the demand curve

A

Population
Advertising
Substitute goods/ price
Income
Fashion trends
Interest rates
Complimentary goods/price

35
Q

What is the law of demand

A

there is an inverse relationship between price and quantity demanded. As price increases Qd decreases

36
Q

What is the law of supply

A

there is a direct relation between price and quantity supply

37
Q

what do we assume for both the law of supply and demand

A

Ceteris Paribus

38
Q

What causes a shift in the Supply curve

A

Productivity
Indirect tax
No. of firms
Technology
Subsidy
Weather
Cost of production

39
Q

Main objectives of economic agents

A

Consumers maximise utility
Firms maximise profit
Gov maximise welfare

40
Q

Ways in which people’s behaviour may deviate from the social norm

A

Altruism/sense of fairness.
Limited capacity for calculations, we aren’t 100% rational
Biased in decision making

41
Q

Is the environment a scarce or unlimited resource

A

Scarce resource

42
Q

Marginal analysis used for

A

To see how one additional unit affects economic systems

OCR Alevel Economics (7 decks)

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