Micro 1.1.5+6 Flashcards

1
Q

Normative statements?

A

Opinionated

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2
Q

Positive statements?

A

Fact

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3
Q

Why is economics a social science?

A

Uses scientific methods to build theories

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4
Q

Problem of scarcity?

A

Unlimited wants, finite resources

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5
Q

Factors of production?

A

Land

Labour

Capital

Enterprise

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6
Q

What is a free good

A

No opportunity cost

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7
Q

Difference between command and market economies

A

Planning mechanism allocates resources vs price mechanism allocates resources

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8
Q

Socialist vs capitalist economies

A

Means of production state owned vs privately owned

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9
Q

1940s UK economy ?

A

State ownership coal, rail, steel

1944 Creation of NHS

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10
Q

1960s/70s UK economy?

A

People said public sector inefficient and wealth consuming

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11
Q

1980s/90s

A

Privatisation, deregulation, marketisation (changing market price for goods)

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12
Q

What did Adam smith believe?

A

Capitalist economy good

People should pursue their self interest with government repression

They act like they are controlled by an “invisible hand” to guide and create the most common good if acting in self interest

But if self interest lead to greed and oppression, gov should intervene

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13
Q

What did Friedrich Hayek believe?

A

Too complex to organise big economic regulation

Theory of “minimum state”
Redistribution of wealth through public treasury

Neoliberalism

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14
Q

What did Karl Marx believe?

A

Communism.

No private property or controlling central authority

Common means of production

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15
Q

What are value judgements ?

A

An assessment of something as good or bad in terms of one’s standards or priorities

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16
Q

Advantages/disadvantages of free market economy

A

Freedom to innovate

Customers drive choices

But

Market failure

Dangers of profit motive

17
Q

What is specialisation

A

Division of labour, Adam Smith

Breaks down large jobs into tiny components

Each worker becomes expert in isolated area, more efficient

18
Q

Advantages of specialisation in organising production

A

More efficient

Better capital employed

19
Q

What is absolute advantage

A

When a country can produce more of a good with fewer resources

Look at numbers

20
Q

What is comparative advantage

A

Relative efficiency

A country has it when it can produce a good at a low opportunity cost

David Ricardo developed idea

21
Q

What are the UK’s comparative advatages

A

Medical technology

Chemicals and pharmaceuticals

Aerospace technology

22
Q

What is comparative advantage on a PPF

A

If same gradient for two countries, opportunity costs are the same, no comparative advantage

23
Q

What are renewable goods?

A

Resources that the rate of extraction is lower than rate of renewal

24
Q

Why is specialisation good in terms of trade?

A

Economies can specialise in what they have a competitive advantage in and total output rises

If they then trade for other product that they need they mutually benefit and have more of both products