Micro Flashcards
Ceteris Paribus
All things being equal; the assumption that whilst the effects of a variable are being investigated, all other variables are kept contant
Law of demand
As the price of a product decreases people want to buy more because they are more willing and able to do so - they can afford it
What will affect demand
Perceived value - quality, preferences, negative publicity, elasticity vs inelasticity, unresponsive people in the market
Positive economics
Making factual and objective claims when analysing economic relationships. Hypothesis is based off scientific facts which can be used to make a model - can be FACT checked so can be wrong or right
Normative economics
Concerned about how things SHOULD be and involved subjective and value judgements - opinions. ‘Should’ ‘Ought’ ‘Too little’ or ‘Too much’ . Not true or false but pure judgement.
Renewable resources
Resource produced faster than being used
Non-renewable resources
Resources who’s rate of consumption is faster than the rate of production
Opportunity cost
The next best alternative given u when making a decision
What does the PPC curve show
Shows the maximum combinations of 2 types of good that can be produced in an economy in a period if all the resources are being used efficiently and the state of technology is fixed
Scarcity
There are not enough resources to produce as many agricultural products and manufactured goods as the economy would like. All points beyond the PPC are unattainable given the current FoPs and state of technology
Efficiency
If the economy is using all its resources to their fullest extent possible and operating on the PPC this means it is achieving ‘productive’ efficiency. The economy is achieving productive efficiency when it is lying on the curve if it were under line this would mean that resources are not being used to their full capacity
Land
Resources that are extracted from nature
Labour
Human component - input in the production process. Requires knowledge, skills, can be both physical and mental.
Capital
The machinery + tools used in production
Enterprise
The factors that control + combines the other factors of production. The entrepreneur is the person who takes risk o set up the business in hope that is earns profit.
Workers specialisation
When a worker performs one specific task
Firm specialisation
When a firms focuses on the production of one specific good or service
Country specialisation
When a country’s economy is focused on producing one specific up of good (oil and cars in Saudia Arabia)
Productivity
Output per capital per period of time
Benefits to PRODUCER of specialisation
If higher output can be produced with less workers - smaller labour cost - more output - more sales - more revenue - more profit - increased efficiency
With this smaller labour cost and higher profit they will be able to to higher and train workers easier.
Benefits to the ECONOMY of specialisation
More efficient if an economy specialises in the production in a good or service that best matches its available factors of production - better quality product - more sales - more revenue - economic growth
Drawbacks to the PRODUCER of specialisation
Specialised workers cannot be switched between tasks (e.g if someone is sick) - recruitment cost if more workers needed
Demotivated workers that would work slower - going on strike - less output - less revenue and profit for the company
Drawbacks to the WORKER of specialisation
In low skilled jobs in low salary jobs unemployed workers may struggle to find new jobs due to having a limited skill set
Repetitive work - bored and unmotivated
Stressful if thing move fast
Repetitive Strain injuries
Drawbacks to the ECONOMY in specialisation
The economy may become dependent and overspecialised - if the industry suffers (drought, tourism, competition)- it is curable to external shocks
Production may be based on finit resources
Export revenue falls leading to economic decline
Primary sector
Extraction of raw materials
Secondary sector
Use raw materials to manufacture
Tertiary sector
Services