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A-level economics > Micro 1 and 2 > Flashcards

Micro 1 and 2 Flashcards

AQA A-level economics

1
Q

What is the fundamental/basic economic problem

A

Individuals in an economy have infinite wants while there are scarce resources available to meet those wants

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2
Q

What is opportunity cost

A

The cost of the next best alternative that you give up when you have a choice

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3
Q

What are the two forms of economic systems

A

Free market/capitalist economy
The command/centrally planned economy

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4
Q

What is a free market/capitalist economy

A

Decisions are solely made by the interactions of consumers and firms with no government interaction

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5
Q

What is the command/centrally planned economy

A

Decisions are solely made by the government

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6
Q

What are positive statements

A

Either true or false statements that are objective

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7
Q

What are normative statements

A

Subjective statements that cannot be verified or falsified

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8
Q

What is a value judgement

A

A judgement about what is good/bad, important/valuable, based upon subjective opinion which informs economic and political decision making

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9
Q

What are the key questions economists try to answer

A
  • What goods or services should be produced to meet customer needs?
  • How should they be produced?
  • Who should receive the goods and services?
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10
Q

What are the four factors of production

A

Labour, land, capital and enterprise

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11
Q

What is land as a factor of production

A

Land includes all natural resources e.g. fertile farm land, coal, oil, wood etc

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12
Q

What is labour as a factor of production

A

The human input in production e.g. supply of workers

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13
Q

What is capital as a factor of production

A

Physical, man-made resources (capital goods) used to produce consumer goods

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14
Q

What is enterprise as a factor of production

A

The individual who supplies products to a market to make a profit which often involves risk-taking to identify a gap in the market and execute their idea

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15
Q

What are economic goods

A

They are scarce so have an opportunity cost e.g. wood used to make a house cant be used for anything else

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16
Q

What are free goods

A

They have no opportunity cost as they are in abundance

17
Q

What is a PPF?

A

A diagram used to illustrate the maximum quantities of two goods that a producer or economy can produce in any combination over a given period of time given the current resources.

18
Q

How does a PPF relate to opportunity cost

A

A PPF shows the opportunity cost for using scarce resources

19
Q

What causes the PPF to shift outwards which allows more of both goods to be produced?

A
  • Improvement in the quality and/or quantity of the factors of production
  • Technological advancements
20
Q

What is a trade off

A

When an economic agent substitutes the production of one good/service for another

21
Q

What is allocative efficiency

A

The state of the economy in which production matches consumer efficiency

22
Q

What is Pareto efficiency

A

When no one can be made better without someone becoming worse off

23
Q

What is utility theory

A

When making economic decisions, consumers aim to maximise their utility and firms aim to maximise profits

24
Q

What is Utility

A

The total satisfaction gained from consuming a good or service

25
Q

What is diminishing marginal utility

A

States that as an extra unit of good is consumed the marginal utility falls. Therefore, the consumer is willing to pay less for the good.

26
Q

What is utility maximisation

A

When consumers aim to create the greatest utility possible from an economic decision

27
Q

What is demand

A

The amount of goods and services consumers are willing and able to buy at a given time and price

28
Q

What are the factors of production

A
  • The scarce resources (inputs) used to make goods and services
29
Q

What is the reward for land

A

rent

30
Q

What is the reward for labour

A

wages

31
Q

What is the reward for capital

A

interest

32
Q

What is the reward for enterprise

A

profit

33
Q

What are the role of households

A

Supply factors of production

34
Q

What is the role of firms

A

Convert factors of production into goods and services

35
Q
A

A-level economics (13 decks)

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