microeconomics

Question 1

what are the 9 key concepts?

Answer 1

Well-being
Interdependence
Scarcity
Efficiency
Choices
Interventions
Change
Equity
Sustainability

Question 2

what is economics a study of?

Answer 2

economics is a social science which studies human behaviour with scientific methods and is backed with evidence.

It is the study of the behaviour of individuals and societies when allocating scarce resources to meet infinite needs.

one way this is done is by modelling the interactions between economic agents.

Question 3

what are economic agents?

Answer 3

the three economic agents are consumers, producers, and government.

Question 4

what is microeconomics?

Answer 4

the study of the behaviour of specifically individuals and firms.

Question 5

What are the factors of production?

Answer 5

CELL

capital= man-made resources used in production e.g. machinery, vehicles
enterprise= skill of organising other factors of production
land= natural resources e.g. agricultural land, oil
labour= human resources e.g. engineers, factory workers

Question 6

who owns factors of production and how are they bought?

Answer 6

households own all factors of production and firms buy them:

Capital- interest
enterprise- profit
land- rent
labour- wages

Question 7

what is the definition of sustainability?

Answer 7

the ability to meet the needs of the present without compromising the ability of future generations to meet their needs.

Question 8

what is the core economic problem?

Answer 8

humans have unlimited wants and needs, but a limited supply of resources. Therefore choices must be made on the allocation of these resources; what is produced? how is it produced? who is it produced for?

Question 9

what is a free market economy?

Answer 9

allocation if resources determined by market forces (consumers & producers)

Question 10

what is a planned market economy?

Answer 10

allocation of resources is determined by the government.

Question 11

what is a mixed market economy?

Answer 11

allocation if resources determined by market forces (consumers & producers) as well as the government.

Question 12

what is opportunity cost?

Answer 12

the value of the next best alternative forgone when a choice is made.

Question 13

what are free goods?

Answer 13

free goods are naturally abundant resources with unlimited supply and therefore do not incur any opportunity cost e.g. air, sunlight.

Question 14

what are the assumptions made with a production possibilities curve (PPC)?

Answer 14

1- fixed amount of resources
2- only 2 goods are being produced
3- technology/production techniques are fixed
4- all resources are used efficiently

Question 15

what is the difference between a concave and a linear ppc?

Answer 15

a concave ppc occurs due to specialisation of resources, as resources are not equally suitable to products different products e.g. the labour/capital needed to produce butter is very different to and perhaps more efficient than that needed to produce clothing.

a linear ppc occurs due to the marginal rate to transformation being constant throughout the curve e.g. 100 hours being split between two activities is one resource.

Question 16

what does a ppc show?

Answer 16

any point on a ppc shows that all resources are being used efficiently.

The movement along the curve can show the opportunity cost of changing goods being produced.

any point not on the line shows that goods are not being used efficiently

Actual Growth is shown when an economy moves closer to the ppc- employment decrases and efficiency increases.

Question 17

benefits and negatives of capitalism

Answer 17

+ freedom of finance and employmemt
+ high competition causing innovation
+ reward for hard work increasing motivation and return on risk

• large gaps in wealthy and poor possible
• resource allocation may be unfair
• profit driven- less focus on needy and rights of workers
• no controll

Question 18

benefits and negatives of communism

Answer 18

+ controlled economy where everyone gets what they need
+ no unemployment- work allocated based on skill and demand
+ profit given back in form of public services
+ resource allocation fair and promotes sustainability

• limits on trade and innovation
• low work and education motivation
• less choice for public e.g. allocation of jobs

Question 19

what is a ‘CAPITAL GOOD’

Answer 19

goods that are used in producing other goods, rather than being bought by consumers.

Question 20

What is ‘CONSUMER GOOD’

Answer 20

goods bought and used by consumers, rather than by manufacturers for producing other goods.

Question 21

what is factor income

Answer 21

income in exchange for factors of production- interest, profit, rent, wages.

Question 22

what are the factors of production

Answer 22

limited resources needed in the production of goods and services- capital, enterprise, land, labour.

Question 23

what is scarcity?

Answer 23

all resources are in limited supply

Question 24

what is allocation?

Answer 24

the distribution of resources to produce goods and services

Question 25

what is the public sector?

Answer 25

te government sector which controls basic services e.g. schools, hospitals, roads

Question 26

what is the private sector?

Answer 26

the sector providing services free from government control