Learning Sequence 1-6 Micro

Question 1

What are the factors of production

Answer 1

Land, Labour, capital, enterprise

Question 2

What is the economic problem

Answer 2

How to use scarce resources to satisfy infinite customer need and wants

Question 3

Ceteris Paribus

Answer 3

When economists assume all other variables remain constant, they look at one variable. They can’t run experiments in labs, so they have to carry it out in real life but they can’t stop the economy by hindering variables, they will be said to remain constant when doing experiments.

Question 4

Opportunity cost of a decision

Answer 4

Value of the next best alternative forgone.

Question 5

PPF

Answer 5

Production possibility frontier shows the max possible production of 2 goods/services with given factors of production

Question 6

Economic growth

Answer 6

Increase in production of goods

Question 7

Negative economic growth

Answer 7

Decrease in production of goods

Question 8

What happens when ppf shifts outwards

Answer 8

Economic growth - efficient utilisation of resources

Question 9

What happens when ppf shifts inwards

Answer 9

Negative growth NOT DECLINE but underutilisation of resources

Question 10

What happens when ppf shifts inwards

Answer 10

Negative growth NOT DECLINE but underutilisation of resources

Question 11

What are consumer v capital goods

Answer 11

Consumer goods are not used to make other goods or services. Whereas capital goods are used to produce other goods or services

Question 12

What are positive statements

Answer 12

They are objective statements, they can be proven factually.

Question 13

What are normative statements

Answer 13

They are normally opinions and are subjective and normally have could/should/ought

Question 14

What is specialisation

Answer 14

When an individual, firm or country concentrates on a production of a limited range of goods or services. They invest in workers and train them

Question 15

What is division of Labour

Answer 15

Specialisation of workers on specific tasks in the production process. It is the specialisation of workers. This is good for firms as it allows them to focus on a narrow range of goods and services and this means that they are faster and efficient at it

Question 16

Productivity

Answer 16

It is the effectiveness of the productive effort - measured in terms of rate of output per unit of input

Question 17

Increased productivity leads to….

Answer 17

Higher output, higher quality, higher standard of living, ,ore efficient allocation of resources

Question 18

Advantages of division of Labour

Answer 18

Division of Labour allows workers to be more skilled through repetition. The productivity rises so does the output bc they produce more. Time is also saved by workers by focussing on a narrow range of tasks, workers are also easier and cheaper to train

Question 19

Disadvantage of division of Labour

Answer 19

Repetition can lead to boredom of tasks, it can then cause morale to drop and the quality of work to drop, simplified Jobs may affect their pride

Question 20

Specialisation advantages

Answer 20

Better quality and higher quantity of products plus there will be a more efficient use of scarce resources. There will be higher trade with other countries, this will lead to economic growth and higher living standards

Question 21

Specialisation disadvantages

Answer 21

There is a lot of over reliance on certain industries. There is increased interdependence that reduces sufficiency. (When we don’t have enough, others can’t rely on us, so one industry may have less production bc another one shut down)

Question 22

Two methods of trading

Answer 22

Barter and money
Barter is exchanging one good for another .
Money is a form of currency

Question 23

4 functions of money

Answer 23

Medium of exchange - something accepted for something else
Medium of value - price of a good shows a value of a good
Store of value - value is kept same and then can be kept for a long time
Method of deferred payment - allows debt to be created

Question 24

Market

Answer 24

Anywhere buyers exchange goods

Question 25

Price mechanism

Answer 25

Market allocates resources (basically run by consumers needs and wants)

Question 26

Command economy

Answer 26

Government or state decides what resources will be allocated

Question 27

Mixed economy

Answer 27

Government or state and price mechanism allocates resources

Question 28

Free market

Answer 28

Price mechanism solely allocates resources

Question 29

Public sector v private sector

Answer 29

Part of economy which is controlled by the gov. Vs. Individuals that seek to profit maximise

Question 30

Advantages of free market and mixed for firms and disadvantages in command economies

Answer 30

They have a higher profit motive, leads to wider choice bc of incentives. Firms then can develop new products and meet consumer demand

But in a command economy, the gov decides the allocation of resources, so this means that firms have no profit motive and can not have a wide range of options for ideas, they are limited, bc they are told what to produce.

Question 31

Monopoly

Answer 31

Dominates the market, 25 percent or more

Question 32

Concentrated market

Answer 32

Only a few large sellers

Question 33

Quality and innovation higher in free and mixed markets

Answer 33

Free markets is when price mechanism allocates resources, this means that there is a higher chance of innovation. There is a higher amount of competition between the firms and there is profit motive present.

Question 34

Efficiency and which economy is more efficient

Answer 34

Optimal production and distribution of scarce resources, free and mixed economies are more efficient than command bc command lack competition and profit motive

Question 35

Income in free and mixed economies vs command

Answer 35

There is less equitable distribution of income, bc the wealthy pass on their wealth over time and give their children privilege.
In command economies, they may still lack equitability in terms of opportunity and access to health services.

Question 36

Progressive taxing

Answer 36

The richer you are the more tax u pay

Question 37

Why are command economies less unfair and unequal

Answer 37

As they are decided by the gov or state and the gov needs everyone to have equal opportunities and resources, but it can still be inequal bc of corrupt people and politicians

Question 38

What is a state made up of

Answer 38

Gov, territory, citizens

Question 39

Difference between state and gov

Answer 39

Gov is not permanent vs state is permanent
State is made up of all citizens, gov is not

Question 40

What does a state do in a mixed economy (price mechanism + gov)

Answer 40

Allocates resources, redistribution of income by welfare spending, regulates consumers and firms