Micro Flashcards
What is a positive statement?
A fact/statement you can prove or disprove
Economics is the science of _______?
Scarcity
What is a normative statement?
A judgement/opinion. You can’t prove/disprove this
What are the four factors of production?
Land
Labour
Capital
Entrepreneur
What can you use a production possibility boundary for? And what does it show?
To illustrate the concept of opportunity cost.
It shows the combinations of two or more goods that can be produced using all available resources efficiently.
How could you shift a production possibility boundary?
- Better trading
2. More skilled workers
What is the shape of the graph on a production possibility boundary and why?
Concaved, because of the relative productivity of the factors of production
What is the market mechanism?
A system which allocates scarce resources for alternative uses for a buyers maximum satisfaction.
What are the merits of the market system?
- Self control
- Maximises satisfaction
- Government failure will not occur
- Competition
What are the problems of the market system?
- Public Goods
- Consumers are irrational
- Asymmetric information
- Inequality
Headphones and phones are______?
Complements goods
Ford and vauxhall are______?
Substitute goods
What do Complementary goods determine?
The demand for a product
What is the definition of a market?
A mechanism to bring buyers and sellers together
Demand and supply determine…?
Price
Demand for a product is…?
Quantity at Price per Time Period
What is the Law of diminishing marginal product utility?
The more you can consume of something the less you value it at
What is demand determined by?
Price and prices of substitutes
What factors effect demand?
Price Income levels Consumers tastes and preferences Competition Fashions
What is conspicuous consumption?
Buying something for the economic status (price)
Equilibrium price is where…?
Demand equals supply
What is ostentatious consumption?
Buying something just because of the brand. To show off.
What affects supply?
Productivity Indirect taxes Number of firms Technology Subsidies Weather Costs of production
True or false? Tax reduces supply and subsidies increases supply
True
What does the elasticity of demand show?
It shows the responsiveness in the change in demand
Perfectly inelastic means…?
It doesn’t matter how much you charge the same number of people will buy it
