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AQA Economics > Micro > Flashcards

Micro Flashcards

1
Q

What are value judgements?

A

Statements or opinions expressed that are not testable or cannot be verified and depend very much on the views of the individual and the values they hold.

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2
Q

What are normative statements?

A

Opinions that require value judgements to be made.

E.g. “The government should reduce the ownership of guns”.

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3
Q

What are positive statements?

A

Statements that can be tested against real world data.

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4
Q

What is the central purpose of economic activity?

A

The production of goods and services to satisfy the needs and wants and thereby to improve economic welfare.

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5
Q

What is the basic economic problem?

A

1) Needs and wants are limitless.
2) Resources are scarce.
3) Economics looks at how best to use these resources to maximise welfare.

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6
Q

What is an opportunity cost?

A

The next best alternative forgone once an economic decision has been made.

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7
Q

What are the 4 factors of production?

A

Land

Labour

Capital

Enterprise

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8
Q

What is the money earned from the 4 factors of production?

A

Land=Rent

Labour=Wages

Capital=Interest

Enterprise=profit

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9
Q

What are the 3 functions of price?

A

Rationing function- Consumer

Incentive function-Producer

Signalling function-Entrepreneur

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10
Q

What is a production possibility boundary?

A

The PPB indicates the maximum possible output that can be achieved, given a fixed set of resources and technology, in a particular time period.

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11
Q

What factors shift PPB to the right?

A
  • investment in new technology
  • increased supply of labour through increase of population or migration.
  • Introduction of new resources such as minerals.
  • improvement in human capital through education and training.
  • encouraging entrepreneurship.
  • increased productivity.
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12
Q

What is human capital?

A

The skills,abilities; motivation and knowledge of labour.

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13
Q

What is productivity?

A

A measure of efficiency measuring the ratio of inputs for outputs.

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14
Q

What factors shift PPB left?

A
  • Emigration.
  • decline in investment in capital.
  • disease leading to a decline in human capital.
  • war.
  • natural disaster.
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15
Q

What is unemployment?

A

When not all of those who are able and willing to work are currently employed.

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16
Q

What is productive efficiency?

A

1) When a firm operates at minimum average total cost, producing the maximum possible output from inputs into the production process.
2) This is achieved in a economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without making less of another.

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17
Q

What is allocative efficiency?

A

Occurs when the available economic resources are used to produce the combination of goods and services that best suit the people’s tastes and preferences.

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18
Q

What is demand?

A

The amount that consumers are willing and able to buy at each given price level.

19
Q

What is supply?

A

The amount that producers are willing and able to produce at each given price level.

20
Q

What is the law of demand?

A

There is a negative correlation between price and quantity demanded.

As price decreases, quantity demanded will increase.

21
Q

What is effective demand?

A

Demand with the ability to pay.

22
Q

What causes contractions/extensions in demand?

A

Change in price.

23
Q

What are the determinants of demand?

Shifts demand curve

A
  • changes in income.
  • advertising and publicity.
  • prices of substitutes and compliments.
  • changes in population.
  • consumer confidence.
  • changes in quality.
  • weather conditions.
  • the law.
  • uncertainty over future prices.
  • fashion
  • internal rates.
  • consumer tastes and preferences.
24
Q

What is an inferior good?

A

Goods or services that will see demand fall when incomes rise.

25
Q

What are normal goods?

A

Goods or services that will see demand increase when incomes rise.

26
Q

What are complimentary goods?

A

Goods that can be consumed together.

E.g. Bread and butter, DvD’s and DVD players.

27
Q

What are substitute goods?

A

Replacement goods for another product.

28
Q

What is composite demand?

A

A good that is demanded for more than one purpose so that an increase in demand for one purpose, reduces the supply for other purposes.

29
Q

What is derived demand?

A

When the demand for one good or service comes from the demand for another good or service.

e.g. Labour, resources.

30
Q

What is price elasticity of demand?

And how do we calculate it?

A

The responsiveness of quantity demanded to a change in the price of the good.

%change in quantity demanded/
%change in price. X100

31
Q

If PeD=1 or higher, the good is seen as?

A

Price elastic.

Meaning a fall in price will cause quantity demanded to rise proportionally more than the price cut.

32
Q

What are capital goods?

A

A good which is used in the production of other goods or services.

33
Q

What is market failure?

A

When the free market fails to result in an efficient allocation of resources.

34
Q

What is government failure?

A

When government intervention to correct market failure does not improve the allocation of resources or leads to a worsening of the situation

35
Q

Reasons why governments fail?

A
  • Imperfect or asymmetric information
  • Conflicting objectives: - caused by political self interest leading to policy myopia (short term look rather then long term)
  • administrative costs involved.
  • Unintended consequences.
36
Q

What is consumer surplus?

A

The difference between equilibrium price and the price that consumers are willing to pay.

37
Q

What is producer surplus?

A

The difference between the equilibrium price and the price that some producers are willing to produce the good for.

38
Q

What is regulation and legislation?

A

Legislation= the law.

Regulations are the organisations which make sure the industry complies with legislation.

39
Q

What is a merit good?

A

A merit good is an under consumed good with positive externalities.

40
Q

What is imperfect and asymmetric information?

A

Imperfect information is when you don’t have all the information.

Asymmetric information is when information is different for different companies

41
Q

What is a demerit good?

A

A good with a negative externality.

42
Q

What is occupational immobility of labour?

A

Occupational immobility of labour is when patterns of demand and employment change, so many workers find it hard to secure new jobs as they may lack the skills required.

43
Q

What is geographical immobility of labour?

A

Geographical immobility of labour is where workers find it difficult to move to where employment opportunities may be due to family ties and/or differences in living costs (housing).

AQA Economics (3 decks)

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