MICROECONOMICS: Economics as a social science, economic data, the economic problem, Production possibility frontiers (PPF), specialisation and the division of labour, types of economy

Question 1

Define Social Science

Answer 1

A group of academic disciplines that examine society and how people interact and develop as a culture

Question 2

Explain one disadvantage of using division of labour

Answer 2

Repetition of the same job can cause boredom leading to reduced job satisfaction and may reduce qualit

Question 3

Explain the difference between positive and normative statements with 2 examples of each (4)

Answer 3

Positive statements are statements that can be supported unlike normative

EXAMPLE OF POS
* Higher interest rates cause people to save more
* High income tax discourages effort

Question 4

Explain the advantages and disadvantages of using index numbers to present your data (4)

Answer 4

Forecasting (1) - use for exploring future trends observed helping businesses identify patterns aiding in economic forecasting

Simplicity (1) - simplify complex data by reducing it to a single figure allowing researchers to intepret economic trends

Limited Applicability (1) - not suitable for all types of data such as qualitative data (1)

Data Simplification (1) - they oversimplify it with critical details and nuances in data that may be lost leading to some understanding of economic phenomena lost

Question 5

Define free goods (1)

Answer 5

Resources that are not scarce (1)

Question 6

Define Scarce (1)

Answer 6

Resource that is in short supply or limited compared to the demand of it (1)

Question 7

Explain the 4 factors of Production
(LLCE) (4)

Answer 7

Land (1) - natural resources used to produce goods/services

Labour (1) - effort that people contribute into producing goods/services

Capital - tools and equipment’s people use to produce goods/services

Entrepreneurship - person combines land , labour, capital to earn profit

Question 8

Describe 2 rewards to the factor of production (2)

Answer 8

Individuals who provide their labour in the form of work receive wages and salaries as their reward and this can be influenced by skill, education, etc (1)

Entrepreneurs can earn considerable profit from risking financial capital (1)

Question 9

Describe the role of entrepreneurs in an economy/business (4)

Answer 9

Taking Risk (1) - Buying more factors of production in hope of earning more profit (1)

Job Creation (1) - when starting or expanding a business, they hire employees reducing employment and stimulating economic activity (1)

Question 10

Define Opportunity cost (1)

Answer 10

The Value of what you give up when you choose to do one thing instead of another (1)

Question 11

Explain the Opportunities cost of going to University (2)

Answer 11

Lost income - not working a full time job so miss out on potential earnings during those years (1)

Family and Social Life - Requires relocating which may impact social and family life (1)

Question 12

Define PPF

Answer 12

Different combinations of economic goods that can be produced if all sources are fully/efficiently employed

Question 13

Describe the problems of scarcity (4)

Answer 13

Limited resources (1) - finite amount of resources available that are sufficient enough to satisfy all human desires (1)

Competition (1) - Individuals ,businesses, governments compete for access to limited resources leading to potential conflicts and tensions (1)

Question 14

Describe the causes that can lead to the growth in the economy (4)

Answer 14

Technologoical advancements (1) - innovations in science and technology can lead to new products, processes, increasing productivity fostering economic expansion (1)

Investment in Physical Capital (1) - increased investment in things such as machinery and technology can lead to higher productivity and output leading to growth in economy

Question 15

Explain why a production possibility frontier may shift inwards or outwards

Answer 15

Specialisation and Division of Labour (1) - more efficient allowing for the production of more goods and services causing an outward shift (1)

Natural Disasters (1) - reduce availability of essential resources as economic productivity decreases causing an inward shift

Question 16

Describe the difference between specialisation and division of labour (2)

Answer 16

Specialisation is where individuals focus on producing specific set amounts if goods/services they are good at making (1)

Division of labour - Breaking down production process of a good or service into smaller tasks handling these specific tasks

Question 17

Explain the functions of money (4)

Answer 17

Medium of Exchange - Buy and sell goods to other people (1)

Measure of Value - value of something depending on how much it costs (1)

Store Of Value - Money can be stored in an account and be spent later (1)

Deferred Payment - individuals and businesses to enter into contracts and agreements that involve future payments (1)

Question 18

List the advantages and disadvantages of Specialisation (4)

Answer 18

Advantages -
- Time saving (1) - individuals don’t waste time switching tasks (1)

• Increased output

Disadvantages
- Income Inequality (1) as highly specialized individuals earn more than others

• Dependency on skill (1) - workers may become over dependent on their skill and make them less adaptable to changing job requirements

Question 19

Describe the two main ways in which resources have been allocated (4)

Answer 19

Market Mechanism (1) - `buyers and sellers are brought together to agree and price for goods/services being exchanged (1)

Planning (1) - Government or central authority make decisions of the allocation of the resources