M 1/2

Question 1

What does the production possiblity curve assume?

Answer 1

That resources are to be fully employed

Only two goods can be produced

Question 2

What is a change in resource efficiency ?

Answer 2

PPC will pivot outwards.

Question 3

What does the PPC show?

Answer 3

The maximum output possibl when all resources are employed.

Question 4

What is a point lying outside the PPC?

Answer 4

Unattainable given the existing resources

Question 5

What is a change in quantity of resources?

Answer 5

If resources increase, PPC would shift outwards and previously unattainable combinations of production now become attainable.

Question 6

Where does economics growth take place?

Answer 6

At full employment of resources

Question 7

What is human resource?

Answer 7

When people are not equally productive at all goods, some are better at one thing and other at other things. Making PPC bow outward

Question 8

What is consumer demand?

Answer 8

Amount that an individual/s are willing to buy at any given price. (Have money to make purchases not just wish to)

Question 9

What does a demand curve show us?

Answer 9

Shows the relationship between demand and price. (Price increases demand falls, price decreases demand increases) LAW OF DEMAND

Question 10

What is a fall and increase in quantity demanded called?

Answer 10

Fall - contraction

Increase - extension

Question 11

What are the exceptions to law of demand?

Answer 11

• snob goods
• investment goods
• quality goods
• giffen goods

Question 12

What is a snob good?

Answer 12

When demand will not decrease much as price increases

Question 13

What is an investment good?

Answer 13

Buyers hope their value will increase in the future, so will still demand even if price increases a little.

Question 14

What is a quality good?

Answer 14

When people believe something is expensive because it has good quality and agree to pay the higher price

Question 15

What is a giffen good?

Answer 15

Price falls - people move onto something better

Question 16

What happens if demand changes?

Answer 16

The demand curve will shift

Question 17

When will demand increase/shift outward ?

Answer 17

Consumers earn higher income
Goods become more popular
Price of substitute increases 
Price of compliment good decreases 
Quality improves 
Weather and seasonal changes take place

Question 18

When will demand fall/shift inward?

Answer 18

Fall in price 
Increase in price
Becomes less popular
Bad publicity 
Lower/higher income tax rates

Question 19

What is the income effect?

Answer 19

Income rises- people are better off , can afford more units of a good.

Question 20

What is an inferior and normal good?

Answer 20

Normal - buy more of a good

Inferior - buy less of that good

Question 21

What’s happens with price of a related good?

Answer 21

Price of a substitute rises - more of the first good is bought
Rises in joint demand - less of the first good will be bought

Question 22

Describe fashion/taste

Answer 22

When a good is out of fashion or replaced, demand falls, shift left

Question 23

Describe season

Answer 23

When. A good is out of season people won’t buy it

Question 24

Define advertising

Answer 24

Good adverts get lifelike to buy and demand shifts right or left

Question 25

Define peer pressure.

Answer 25

Influential polls can encourage/discourage people to buy less or more of a good , shift left/right

Question 26

Define religion/customs/law

Answer 26

People compelled to buy/not buy a good by system.

Question 27

What does the production possibility curve show ?

Answer 27

The opportunity cost