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Economic A Level > Micro Economics 1 > Flashcards

Micro Economics 1 Flashcards

1
Q

definition of economics

A

economics is the study of how best to allocate scarce resources across alternative uses

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2
Q

What is a positive statement

A

They are objective statements and can be tested against evidence to see whether they are true or false
e.g. The earth is flat

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3
Q

What is a normative statement

A

They are subjective statements that contain value judgements and cannot be scientifically tested. They contain opinions and are lacking objectivity
e.g. crisps are tastier than chocolate

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4
Q

What statements to economists try to use

A

Positive
But in reality many of the more interesting questions are normative

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5
Q

What is economic activity

A

It refers to the use of scarce resources in production, exchange, distribution or consumption

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6
Q

What is production

A

It involves the conversion of scarce resources to finished goods and services

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7
Q

What is distribution

A

It is the movement of the raw resources or finished goods and services to points of production and consumption

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8
Q

What is exchange

A

It is any monetary or non-monetary transaction between a producer and a consumer

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9
Q

What is consumption

A

It describes the using up of a good or service by a consumer in order to gain satisfaction

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10
Q

What is primary sector activity

A

The extraction of resources in their rawest forms

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11
Q

What is secondary sector activity

A

The processing and manufacturing of these resources into goods and services

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12
Q

What is tertiary sector activity

A

The provision of services and the distribution and exchange of goods

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13
Q

What is the purpose of economic activity

A

It is the production of goods and services to satisfy the needs and wants of a nations citizens

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14
Q

What is a need

A

It is something that is necessary for survival e.g. food, shelter

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15
Q

What is a want

A

It is something that is desirable but not strictly necessary for survival

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16
Q

What is an economic good

A

It is a good or service that involves scarce resources

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17
Q

What is a free good

A

Any good that involves no scarce resources

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18
Q

What sub problems are there to resources scarcity

A

What to produce
How to produce
For whom to produce

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19
Q

What causes resource scarcity

A

Infinite wants and finite resources

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20
Q

What are resources

A

They are the input or factors of production that are used to produce finished goods and services

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21
Q

How are resources categorised

A

Land - any natural resource
Labour - any human input
Capital - any man made factor of production
Enterprise - The risk taker that organises the other factors of production

22
Q

What is the factor reward for each factor of production

A

Land - rent
Labour - wages
Capital - interest
Enterprise - profit

23
Q

What is the definition of scarcity

A

a situation in which there are finite resources but infinite wants

24
Q

What is the definition of economic problem

A

How to allocate finite resources to meet infinite wants

25
Q

What is Resource allocation

A

The placement of land, labour, capital and enterprise into competing areas of production in an attempt to maximise social welfare

26
Q

What is opportunity cost

A

The opportunity cost of any decision is the next best alternative foregone

27
Q

What is the PPF

A

The Production Possibilities Frontier
The line where points of maximum possible outputs lie given the current level of resources and the existing level of technology

28
Q

What does it mean if production is below the PPF

A

There is less output and there is an under performance and they are being inefficient

29
Q

What does it mean if production is above the PPF

A

More than the maximum output but it is impossible

30
Q

How can the PPF be moved up

A

Increase resources or better the resources they have

31
Q

Why would production be under the PPF

A

Because some resources are unemployed and the economy is not producing to its full potential

32
Q

What is the opportunity cost of producing more of one item

A

It is the reduced ability to produce and consume the other item
Called a trade-off

33
Q

Why is the PPF not straight

A

Because of the diminishing returns

34
Q

What causes diminishing returns

A

Because as resources are shifted from one item to another there is a shift in efficiency because not all resources are as efficient at producing one thing as they are another

35
Q

What is the position of the PPF determined by

A

The quantity and quality of the resources and the state of technology

36
Q

What are the two types of economic efficiency

A

Productive efficiency
Allocative efficiency

37
Q

What is Productive efficiency

A

It is when all of a countries resources are fully employed so that it is not possible to make more of any one good/service without having to produce less of another

38
Q

What is Allocative Efficiency

A

It is when resources are used in a way that maximises consumer satisfaction

39
Q

What is Pareto Efficiency

A

It is when a country is productive and allocative efficient

40
Q

definition of resources

A

an asset used to produce goods and services that meet human needs and wants

41
Q

Definition of Specialisation

A

It is when a factor of production concentrates on a particular activity on a repetitive basis in order to improve productivity and efficiency

42
Q

Definition of Division of Labour

A

It is when work is split up into specialised tasks preformed by specialist workers

43
Q

Definition on self-sufficiency

A

When groups of people try to meet all their economic needs through their own efforts rather than specialising in particular areas

44
Q

Who observed the idea of division of labour

A

Adam Smith

45
Q

What book did he write about division of labour

A

The Wealth of Nations in 1776

46
Q

How is productivity measured

A

It is measured by output per worker or per unit of time

47
Q

What are the downsides of division of labour

A

Specialising narrow areas of activity work may become repetitive and boring for individual workers
It also makes workers vulnerable to unemployment if the demand for their skills disappears

48
Q

What will an economic system need if people are specialising

A

A mechanism for individuals to exchange their specialist output which is conducted in a market

A system that allows individuals to place relative values on goods and services that are exchanged. This is best done by introducing a monetary unit or currency

49
Q

What is the market mechanism

A

It is a mechanism for individuals to exchange their specialist output. This is conducted in a market

50
Q

What are the two main things an economic system will need that is based on division of labour

A

Markets
Money

Economic A Level (22 decks)

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