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Economics Y1 > Micro L1 - 6 > Flashcards

Micro L1 - 6 Flashcards

1
Q

Economy

A

All the good + services produced in an area

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2
Q

Factors of production and what they can be split into:

A
  • Land
  • Labour: Renewable and Non-renewable
  • Enterprise
  • Capital: Machinery and Tools
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3
Q

What is the economic problem?

A

How to use the available scarce resources to satisfy people’s infinite needs as effectively as possible

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4
Q

What are the two types of models, what are they and why are they developed?

A
  • Theoretical model –> Qualitative and based on theory
  • Empirical model –> Quantitive and based on data
    They are developed to explain and predict economic phenomena, since scientific experiments cannot be conducted
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5
Q

What is ceteris paribus and why is it used?

A

If all other factors do not change/ are equal
This is used to overcome the problem of multiple factors affecting economic activity, which is why scientific experiments cannot be conducted

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6
Q

What is an opportunity cost?

A

Value of the next best alternative

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7
Q

What is a PPF

A

Production possibility frontier, which is the max potential output of a combo of 2 goods/services an economy can achieve

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8
Q

What causes economic growth?

A
  • An increase in the quality of the factors of production
  • An improvement in the quantity of the factors of production
  • A combo of the two
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9
Q

How is economic growth and negative economic growth shown on a PPF?

A

If the curve shifts outward then there is economic growth.
If the curve shifts inward then there is negative economic growth

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10
Q

What does it mean when an economy is below the PPF curve?

A

There is a misallocation of resources which could be:
- inefficient use
- underutilisation

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11
Q

What are consumer goods?

A

Goods that do not produce other goods that are present to satisfy needs and wants

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12
Q

What are capital goods?

A

Goods that produce other goods and services

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13
Q

What will an increase in capital goods result in?

A

A long term increase in PPF

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14
Q

Positive economic statement:

A
  • Can be proven true/false
  • Objective
  • Based on facts
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15
Q

Normative economic statement:

A
  • Cannot be proven true/false
  • Subjective
  • Based on feelings
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16
Q

Duty:

A

Tax on imported goods

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17
Q

Specialisation:

A

Individual/firm concentrates on production of limited range of goods + services

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18
Q

Division of labour:

A

Specialisation of workers on specific tasks

19
Q

How does division of labour increase productivity?

A

They are more skilled due to repetition of tasks so there is higher productivity ( better quality + greater quantity) and therefore greater output

20
Q

Why does capital tend to increase labour productivity?

A

Automation has zero human error so it is more effective, leading to an increase in productivity

21
Q

What does increased productivity lead to?

A
  • Higher output
  • Higher living standards
22
Q

Productivity equation:

A

Productivity = output produced/ total inputs used

23
Q

Advantages of division of labour:

A
  • Cheaper to train workers
  • Increased efficiency (time is saved)
  • Increased productivity
  • Workers more skilled
24
Q

Disadvantages of division of labour:

A
  • Repetitive tasks can lead to boredom, poor morale and therefore poor quality
  • Simplified job roles can lead to little pride in job
25
Q

Specialisation advantages:

A
  • Better quality + higher quantity
  • More efficiency
  • Higher trade w/ other countries
  • More economic growth so better living standards
26
Q

Specialisation disadvantages:

A
  • Over-reliance on few industries is risky
  • Increased interdependence leads to reduced self-sufficiency
27
Q

Methods of trading and what they are:

A
  • Barter –> exchanging goods
  • Money –> recognised currency
28
Q

Functions of Money and what they are:

A
  • Medium of exchange –> smth commonly accepted in exchange
  • Measure of value –> price shows a good’s value
  • Store of value –> value is maintained and can be saved for a long period of time
  • Method of deferred payment –> allows debt to be created
29
Q

Why can division of labour result in lack of pride?

A

They may feel they are not developing their skills

30
Q

Planning:

A

Government allocates resources w/ funding from taxation

31
Q

Market:

A

Anywhere where buyers + sellers can exchange goods and services

32
Q

Price mechanism

A

The process by which market allocates resources

33
Q

Command economy:

A

Economy where resources are solely allocated by state

34
Q

Free market economy:

A

Economy where resources are solely allocated by the price mechanism

35
Q

Mixed economy:

A
  • Economy where resources are allocated by both price mechanism and state
36
Q

Public sector:

A

The part of an economy controlled/owned by gov

37
Q

Private sector:

A

The part of an economy that is not controlled/owned by gov

38
Q

What is the aim of the public sector and private sector respectively?

A
  • Public sector aims to provide the services that consumers need
  • Private sector aims to maximise profit/raise awareness
39
Q

Why is there a wider choice in free market and mixed economies?

A

There is a profit motive, which incentivises them to develop new products and meet consumer demand

40
Q

Why may there possibly be limited choice in free market and mixed economies?

A

This may be due to concentrated markets and monopolies

41
Q

Monopoly:

A

More than 25% market share

42
Q

What are the effects of competition and profit motive in free market and mixed economies?

A
  • Higher quality
  • Higher innovation
  • Higher efficiency
  • Wider choice
43
Q

Why is there limited choice in command economies?

A

They have no profit motive and are told what to produce so there is no incentive to develop new products

44
Q

Efficiency:

A

Optimal production and distribution of scarce resources

Economics Y1 (12 decks)

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