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Microeconomics > Micro 1 - 5 > Flashcards

Micro 1 - 5 Flashcards

1
Q

Why is economics a social science?

A

Economics is unpredictable, therefore being a social science

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2
Q

What is a model?

A

A model is a simplified representation of reality, and includes basic assumptions

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3
Q

Why do economists make models?

A

Economists make models to understand how people behave and make predictions about the future

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4
Q

What is Ceteris Paribus?

A

The assumption that all other things stay equal.

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5
Q

What is the scientific methodology of an economist?

A
  1. Observe people’s behavior in response to something
  2. Create a hypothesis based on that thing
  3. Test the hypothesis
  4. If the evidence doesn’t support the hypothesis, change the hypothesis so it better fits the evidence
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6
Q

What is a positive statement?

A

A statement that can be tested

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7
Q

What is a normative statement?

A

A statement that cannot be tested?

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8
Q

What is the basic economic problem?

A

Unlimited wants and needs, but limited resources

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9
Q

What is opportunity cost?

A

Cost of the best alternative option

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10
Q

What are free goods?

A

No opportunity costs as it is unlimited like air

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11
Q

Economic goods?

A

Limited goods - so they have an opportunity cost

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12
Q

4 factors of production

A

Land,
Labour,
Capital goods,
Enterprise

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13
Q

What is a factor of production?

A

The inputs to produce goods and services.

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14
Q

Define and state the reward of the land factor of production

A

Natural resources like trees or fossil fuels

Reward: Rent (of the land)

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15
Q

Define and state the reward of the Labour factor of production

A

Human input into the production process like workers

reward: Wages

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16
Q

Define and state the reward of the Capital goods factor of production

A

A physical resource and a man-made aid for production of consumer goods. (infrastructure)

Reward: Interest

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17
Q

Define and state the reward of the enterprise factor of production

A

The entrepreneur who brings all of the factors of production together

Reward: Profit

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18
Q

Give 3 examples of infrastructure

A

Railways, ports, factories

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19
Q

Production possibility frontier

A

A curve that shows the maximum combination of goods and services that can be produced in a given time period using limited resources.

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20
Q

What does the PPF look like

A
21
Q

What does any point on the line show?

A

Productive efficiency

22
Q

How do you find the opportunity cost on a PPF graph?

A

T2 - T1 > Image

23
Q

Productive efficiency definition

A

When it is impossible to produce more of one good without producing less of another

24
Q

What 3 things do points on the PPF curve show?

A
  1. Full employment
  2. Potential output
  3. Productive efficiency
25
Q

Potential output

A

Potential output is the maximum amount of goods and services that are being sold to buyers

26
Q

What does any point within the PPF curve show?

A

Productive inefficiency

27
Q

What does any point on the PPF curve show?

A

Opportunity cost, moving employees from one sector to another

28
Q

What could cause a PPF curve to shift to the right

(reach a previously impossible point)

A

Increase in productive capacity

29
Q

Examples of how long run economic growth can be achieved

A

Invasions and immigration

30
Q

Specialisation definition

A

When individually, firms, or countries concentrate on the production of one product or task

31
Q

Why are economists interested in specialisation?

A

It allows us to allocate our scarce resources better

32
Q

What are the 2 types of specialisation?

A
  1. Specialisation by product E.g BMW
  2. Specialisation by Process
33
Q

What levels can specialisation occur on?

A
  1. Individual
  2. Firm
  3. National
34
Q

Neo classical economist

A

Revised adam smith’s ideas of anti-government

35
Q

Keynesians

A

Pro government, revised ideas of John Keynes

36
Q

3 Advantages of specialisation

A
  1. Productivity
  2. More profits
  3. Lower wages
37
Q

3 Disadvantages of specialisation

A
  1. Bored employees
  2. People become deskilled, capital could replace workers
  3. Over - interdependence
38
Q

What is the 4 functions of money?

A
  1. Store of value
  2. Medium of exchange
  3. unit of account
  4. Standard of deferred payment
39
Q

What is store of value

A

It can be used for future transactions without the fluctuation in it’s monetary worth

40
Q

What is medium of exchange?

A

Accepted by other people

41
Q

What is unit of account

A

Tells us how much the note or cash is worth

42
Q

What is standard of deferred payment?

A

Money is used to express debt

43
Q

What are the objectives of economic agents?

A

To determine how resources are allocated

44
Q

What are the 3 economic agents?

A

Consumers
Producers
Government

45
Q

What is the role of consumers in economic agency?

A

To maximise utility (Satisfaction)

46
Q

What is the role of Producers in economic agency?

A

To maximise profits

47
Q

What is the role of Government in economic agency?

A

Claim tax, economic growth and stability

48
Q
A

Microeconomics (14 decks)

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