Micro T1 Flashcards
What is a social science -
The study of society and the relationships of individuals within
Given an examply of eco as a social science
Supply and demand theory
What is a value judgement
A statement based on a view or opinion
What is a normative statement
Statements that cannot be rejected by looking at facts, they cannot be measured and are ethical and moral
What are positive statements
Statemetns that can be tested against real world data
Are positive statements true
No not always
What is eco activity
The production distribution and consumptions of goods and services
What is eco welfare
The benefit individuals gain from allocation fo resources
What is the point of eco activity
Satisfy wants and needs with goods and services
What are key economic descions
What to produce
How to produce
Who is beneifted from the good or service produced
When will economic welfare increase
When wants and needs are catered for
What is a fundemental economic problem
Scarcity
What is scarcity
The lack of resoruces
What are some consequences of scarcity
Wants and needs not met
Opportunity cost
Conflict in how to allocate resources
Allocation resource will not benefit all
What are the types of goods
Economic
Free
What are economic goods
Goods which are scarce and have an opportunity cost
What are free goods
Goods which have no opportunity cost
What is welfare
The happiness of humans
Is short term happiness always good
No it can lead to long term negative affects
What is needed to create goods and services
The four factors of production
What are the 4 factors
Land
Labour
Capital
Entrepreneuship
What is the ultimate reward of the factors
Factor income - wages, rent, interest, profit
Who are the key economic players
Consumers
Workers
Firms
Government
What are the roles of consumers
To purchase products
What is the role of workers
To manufcature
What is the role of firms
To allocate resources
What is the role of the government
To maintain a thriving economy
What are some conflicting interest of the key players
Consumers want low prices, firms want high
Workers want high wages, firms want low costs
The goverment wants regulation and saftey, firms want low costs
Consumers want good quality products, firms want low costs
What is the free market
Where there is little government involvement, their main role is to ensure rules are fair
What is an intervensionist economy
Where the government are involved in the markets mechanisms, etc
What are some features of a free market economy
High value of things that are demanded and scarce
Suppliers want to supply higher value products
What is the incentive function
Where producers are encouraged to supply more when prices rise to gain more profit
What is the signaling function
Where price changes, demonstrating; where resouces are required or not and what is scarce
What will firms do if prices rise due to higher demand
Expand production to cater for higher demand
What will firms do if there is excess suply in a market
Lower prices to eliminate the supply surplus
What is the rationing function
When there is scarcity , therefore prices rise so only those willing and able to pay will purchase a product
When does the rationing function occur on a graph
When S shifts to the right, and the equilibrium is higher on the demand curve
What will households do when their is scarcity
Proportion their incomes
What are ways to deal with scarcity
Leave it to the free markeet
Leave it to the government
How would the free market deal with scarcity
Distribute resources according ot consumer preferences as of their incentive for profit
How would the government deal with scarcity
Distribute resources failry, to avoid issues and externatlities such as inequalityof distributions
What is opportunity cost
The loss of choosing x instead of y
What are some things that come under OC
Time
Money
Resources
Life choices
How can we improve the quality of our resources
Improve our 4 factors of production
Why would improving labour improve the quality of our resources
As they are more:
Skilled, knowledgeable, motivated
What has the government done to improve human capital
Improved education
Mandaotry education
Subsidised training schemes
Who came up with the idea of the division of labour
Adam Smith
What is the division of labour
Where production is split for different groups of workers
What are benefits of the division of labour
Specialisation
What does specialisation lead to
Increased productive
Higehr quality products
Efficency
Lower costs
Economies of scale
What does a production possibility diagram illustrate
The different features of the key economic problems
What are some of the key economic problems
Scarcity
Resource allocation
Opportunity Cost
trade offs
Unemployment
Eco growth
When does productive efficiency occur
When there is minimum average costs
Where there is little waste of resources
Where will productive efficency be seen on the graph
On the boundary, but this doesnt mean they have the best combination of resources
What is allocative efficiency
Where the resources used to produce a combination of goods and services, best match wants and needs
What is there always going to be with allocative efficiency
Opportunity cost
When on a PPB can you increase the production of 2 things?
When the economy either grow or production potential increases
What does it mean if there is a point on the PPB
There is full productivity
What does it mean if there is a point in the PPB
Resources are not being used to full capacity
What does it mean when there is a point beyond the PPB
Nothing, it is not possible for there to be a point
When would a PPB shift occur
When the capacity of the economy is increased
How to increase a PPB
Increase labour productivit y
Tech changes
New resources
What is a mixed economy
Where part of the economy is apart of the free market and part is managed by the government
How do mixed economies occur
When most businesses are ran by private enterprise
What part of the economy do the government manage
Public services
Regulation
Does any point on the PPB suggest they are using the best combination of resources to maxamise welfare
No
When can you increase the production of both products
When the firm expands and grows the quantity of its resources
How can you increase output and welfare
By changing the allocation of resources
