lesson 5-6

Question 1

what is an incentive?
and what do low prices incentivise?

Answer 1

they encourage a certain behaviour you would not otherwise do
low prices incentivise consumers to buy

Question 2

what else can a production possibility curve be referred to as?

Answer 2

production possibility frontier

Question 2

what does the production possibility curve show?

Answer 2

The PPC curve shows economic choice and opportunity cost. It shows the maximum output an economy can produce with its resources at max efficiency.

Question 2

what is a consumer good?

Answer 2

goods used by consumers

Question 2

what is productive efficiency?

Answer 2

maximising output with our resources

Question 2

if there is a cross inside the production possibility curve what does it show?

Answer 2

unemployment / inefficiency

Question 2

some reasons for being inside the production possibility curve (inefficient)?

Answer 2

1. lack of workers
2. strikes
3. productively inefficient
4. poor machines
5. covid/economic shock
6. unemployment

Question 2

what is inelastic demand?

Answer 2

we will keep on buying it regardless of price as its a necessity

Question 2

What is allocative efficiency?

Answer 2

When consumers get both needs and wants

Question 3

What’s a market?

Answer 3

Where buyers and sellers meet up and agree on a price
Buyers buy what they want or need if they can afford it
Sellers sell what they can to make and try to earn profit for their trouble

Question 4

Some uses of money

Answer 4

1. A medium of exchange
2. Unit of account
3. Save

Question 5

Money as a unit of account

Answer 5

It measures a value

Question 6

What makes up a competitive market?

Answer 6

1. Many sellers who went to high prices for high profits
2. Many buyers who want low prices but high quality
3. No buyer or seller dominates

Question 7

What is a planned economy?

Answer 7

Planned-public sector
Things are planned from the centre by the government (government control on all things)

Question 8

What is a market economy?

Answer 8

Where allocation of resources and prices of goods and services are determined by the market forces mainly supply and demand

Question 9

What did Adam smith argue?

Answer 9

markets should be left alone as the selfish pursuit by every individual could lead to an economy where benefit was maximised as it incentivises producers to be allocative efficiency

Question 10

What did Hayek argue?

Answer 10

He was in favour of the free market and no government intervention as he thought state control would lead to loss of freedom

Question 11

What is a free market?

Answer 11

When people can buy and sell goods and services that is not under the control of the government

Question 12

Advantages of a free market

Answer 12

1. Profit is an incentive to take risks
2. Workers motivated by the high wages boosting productivity
3. Demand is signalled to firms by rising prices so firms can react with rising the supply so consumers get what the want which is allocative efficiency

Question 13

Disadvantages of free markets

Answer 13

1. People miss out on essential services making it inefficient
2. Lots of waste
3. Unequal distribution of wealth
4. Firms are motivated by profits and don’t care about side effects including the environment
5. Rewards if you are already rich

Question 14

What is demand?

Answer 14

The quantity of a product which all the consumers in a market are willing and able to buy at different market prices.

Question 15

What’s the law of demand?

Answer 15

If price falls then more is demanded

Question 16

Falling prices causes what to happen to demand?

Answer 16

Demand will extend (increase because its lower so people are more inclined to buy it)

Question 17

Rising prices causes what to happen to demand?

Answer 17

Causes demand to contract (decrease/ go back because prices are higher and people aren’t willing to pay those prices)

Question 18

What is supply?

Answer 18

The willingness and availability to sell a product at any given price over some given period of time

Question 19

What is the public sector financed by?

Answer 19

Taxation

Question 20

Inelastic demand is known as a…

Answer 20

Necessity

Question 21

why is a productive work force good for an economy?

Answer 21

more products are produced, increasing efficiency, leading to increase in profit

Question 21

why are all economic decision makers forced to make choices?

Answer 21

resources are finite

Question 22

The price mechanism allocates scarce resources…

Answer 22

ensuring that low prices attract consumers and high prices put them off

Question 23

in the free market what are firms incentivised to do?

Answer 23

to produce what people want