Microeconomic Review Flashcards
What are the types of resources in production?
Land, Labour, Capital, Entrepreneurship
These are the primary factors of production.
What does ‘Land’ refer to in the context of resources?
Natural resources used to produce goods and services, such as water, land itself, and minerals.
Land encompasses all natural elements that contribute to production.
Define ‘Labour’ in production.
Human effort, both physical and mental, used in the production process.
This includes the work of employees, workers, and professionals.
What is meant by ‘Capital’ in the production process?
Man-made resources used in production, including machinery, tools, equipment, buildings, and technology.
Capital is essential for enhancing productivity.
What is ‘Entrepreneurship’?
The ability and willingness of individuals to take risks, innovate, and organize resources to produce goods and services.
Entrepreneurs are key drivers of economic growth and development.
True or False: Entrepreneurs do not play a significant role in economic growth.
False
Entrepreneurs are crucial for driving economic growth.
Fill in the blank: _______ refers to all natural resources used to produce goods and services.
Land
Land includes resources like water and minerals.
Fill in the blank: _______ includes human effort in the production process.
Labour
Labour encompasses both physical and mental contributions.
Fill in the blank: _______ refers to man-made resources in production.
Capital
This includes tools, machinery, and technology.
What is opportunity cost?
The value of the next best alternative that you give up when you make a choice.
It’s a fundamental concept in economics that helps us understand the trade-offs involved in decision-making.
In the context of opportunity cost, what happens when a company decides to use all its resources to produce iPhones?
It cannot produce laptops simultaneously.
This illustrates the trade-offs involved in resource allocation.
What is the opportunity cost of producing laptops instead of iPhones?
The reduced quantity of iPhones that could have been produced with those resources.
It represents the benefit or value sacrificed from not producing more iPhones.
Fill in the blank: Opportunity cost helps us understand the ______ involved in decision-making.
trade-offs
True or False: Opportunity cost is only relevant to financial decisions.
False
Opportunity cost is applicable to any decision-making scenario where resources are limited.
What is economic theory?
A set of principles that explain economic phenomena, involving understanding how resources are produced, distributed, and consumed based on definitions, assumptions, and hypotheses.
Define ‘variable’ in economic terms.
A factor that can be measured and can take on different values, such as price and quantity demanded.
What is a graph in the context of economics?
A visual representation that shows how different variables relate to each other in a clear and efficient way.
What are the three types of relationships that can exist between economic variables?
- Unrelated
- Negative
- Positive
What does a positive relationship between variables mean?
Both variables move in the same direction.
What does a negative relationship between variables indicate?
One variable moves up while the other moves down.
What does it mean if two economic variables are unrelated?
One variable moves while the other remains unchanged.
What is a Traditional Economy?
An economic system rooted in tradition, customs, and beliefs passed down over generations. People produce what they need to survive and trade within their community.
Examples include farming, hunting, and fishing.
Define Free-Market Economy.
A system where individuals and private businesses make economic decisions based on supply and demand with minimal government intervention. Prices are determined by market exchanges.
Buyers and sellers freely exchange goods and services.
What characterizes a Command Economy?
The government controls major aspects of the economy, including production, pricing, and distribution of goods. Decisions are centrally planned to achieve specific societal goals.
Often associated with socialist or communist systems.
What is a Mixed Economy?
A system that combines elements of both free-market and command economies. Governments regulate certain sectors or provide public services while private enterprise drives much of the economy.
Balances public and private interests.
What does an outward shift of the PPC indicate?
An increase in an economy’s capacity to produce.
This reflects overall economic growth.
What shape of the PPC reflects increasing opportunity cost?
Concave (Bowed Out)
As more of one good is produced, the opportunity cost of producing additional units increases.
What does a straight line PPC represent?
Constant opportunity costs
This scenario is rare in real-world situations.
What does it mean when a point is inside the PPC curve?
Underutilization of resources or inefficiency
Resources are not being used to their full potential.
What does a point outside of the PPC curve represent?
Unattainable production with current resources
This indicates that the production level cannot be achieved with available resources.
What causes an outward shift in the PPC?
Improved technology, increase in resources (e.g., labor, capital), better education or training (human capital)
These factors enhance the productive capacity of the economy.
What leads to an inward shift of the PPC?
Loss of resources (e.g., natural disasters, war), decline in technology or productivity
Such events reduce the economy’s capacity to produce goods and services.
What does scarcity refer to in economics?
Resources are limited, so economies must make choices about what to produce.
Scarcity is a fundamental concept that forces trade-offs and prioritization in resource allocation.
What are trade-offs in the context of production?
Producing more of one good means producing less of another.
Trade-offs illustrate the opportunity cost associated with resource allocation decisions.
What is opportunity cost?
The cost of the next best alternative foregone when a choice is made.
Opportunity cost is a critical concept in decision-making processes.
Define productive efficiency.
Points on the curve represent maximum output with given resources.
Productive efficiency indicates that resources are used in the most effective way possible.
What is allocative efficiency?
The specific point on the curve that reflects societal preferences.
Allocative efficiency occurs when resources are distributed in a way that maximizes the overall satisfaction of society.
Define function in economics
A relationship that expresses how one economic variable depends on one or more other variables
Example: A production function shows the relationship between inputs (like labor and capital) and the output produced.
What is entrepreneurship?
The process of identifying opportunities, taking financial and personal risks to establish a business, and creating value for society
Entrepreneurs often drive innovation and contribute to economic growth by creating jobs and goods or services.
What is an economic model?
A simplified framework, often in the form of equations, graphs, or diagrams, used to explain and predict real-world economic behaviors and phenomena by making certain assumptions.
Define economic growth
The increase in a country’s output of goods and services over time, often measured as the rise in Gross Domestic Product (GDP)
It reflects improved productivity and standard of living.
Define microeconomic
The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of resources.
What is elasticity of demand?
A measure of how much the quantity demanded of a good responds to a change in the price of that good.
What is a mixed economy?
An economic system that combines elements of both capitalism and socialism.
Fill in the blank: A production function shows the relationship between inputs (like labor and capital) and the _______.
[output produced]
True or False: Economic growth is only measured by the rise in Gross Domestic Product (GDP).
False
While GDP is a primary measure, economic growth can also be reflected in other factors like productivity and standard of living.
Fill in the blank: An economic model is used to explain and _______ real-world economic behaviors.
[predict]
Define gradient in economics
The rate of change of a function with respect to one of its variables.
