Learning Sequence 1-6 Micro Flashcards
What are the factors of production
Land, Labour, capital, enterprise
What is the economic problem
How to use scarce resources to satisfy infinite customer need and wants
Ceteris Paribus
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.
Opportunity cost of a decision
Value of the next best alternative forgone.
PPF
Production possibility frontier shows the max possible production of 2 goods/services with given factors of production
Economic growth
Increase in production of goods
Negative economic growth
Decrease in production of goods
What happens when ppf shifts outwards
Economic growth - efficient utilisation of resources
What happens when ppf shifts inwards
Negative growth NOT DECLINE but underutilisation of resources
What happens when ppf shifts inwards
Negative growth NOT DECLINE but underutilisation of resources
What are consumer v capital goods
Consumer goods are not used to make other goods or services. Whereas capital goods are used to produce other goods or services
What are positive statements
They are objective statements, they can be proven factually.
What are normative statements
They are normally opinions and are subjective and normally have could/should/ought
What is specialisation
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
What is division of Labour
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
Productivity
It is the effectiveness of the productive effort - measured in terms of rate of output per unit of input
Increased productivity leads to….
Higher output, higher quality, higher standard of living, ,ore efficient allocation of resources
Advantages of division of Labour
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
Disadvantage of division of Labour
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
Specialisation advantages
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
Specialisation disadvantages
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)
Two methods of trading
Barter and money
Barter is exchanging one good for another .
Money is a form of currency
4 functions of money
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
Market
Anywhere buyers exchange goods
