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Economics > Microeconomics LS1-4 > Flashcards

Microeconomics LS1-4 Flashcards

1
Q

What is an economy?

A

All the goods and services produced in an area

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2
Q

What is the difference between a good and a service?

A 
Good= tangible (can touch)
Service= intangible (cannot touch)
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3
Q

What are the factors of production and define them.

A 
Capital= things which are used to make goods and services 
Enterprise= willingness of people in business to take risks to make a profit 
Land= refers to the natural resources such as oil, forests and land itself 
Labour= all of the work done by humans in production
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4
Q

How would an economy increase labour?

A

By increasing birth rate (providing incentives) and attracting immigration

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5
Q

How would an economy increase its PPF curve?

A

Increase in economic growth, firstly by increasing labour and capital.

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6
Q

What is the economic problem?

A

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

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7
Q

What are economic agents and who are they

A
  • Groups that participate in the economy
  • Producers = create goods and services
  • Consumer (individuals and firms) = buy goods and services
  • Government= sets rules that other economic agents must follow, and also produces some goods and services ( roads, health care)
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8
Q

What are economic models?

A

What economists produce to predict the impact of economic change, ceteris paribus

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9
Q

Why is it difficult for economists to run experiments?

A
  • economy is always changing

- cannot control the external variables (economy)

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10
Q

What do economists rely on instead of experiments?

A

Data and assumptions

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11
Q

What does ceteris paribus mean?

A

Assuming other variables remain constant

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12
Q

Why is ceteris paribus necessary for economic analysis?

A
  • to isolate how one factor affects the economy

- to make assumptions and predictions otherwise the other factors can overcomplicate an assumption

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13
Q

Define opportunity cost

A

The value of the next best alternative forgone as a result of the decision

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14
Q

How do consumers use opportunity cost?

A

Use it to decide what to spend their income on

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15
Q

How do producers use opportunity cost?

A

Use it to decide what and how to produce goods and services

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16
Q

How to governments use opportunity cost?

A

Use it to decide what policies to choose

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17
Q

What is the empirical model?

A

A model that uses data and evidence from the real world

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18
Q

What affects the PPF?

A
  • factors of production

- quality of factors of production

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19
Q

What does PPF stand for?

A

Production possibility frontier

20
Q

What does a PPF do?

A

Shows the maximum potential output of a combination of two goods or services an economy can achieve when all its resources are being employed fully and efficiently, given the current level of technology.

21
Q

How are the factors of production and the size of economy related?

A

More factors of production = larger economy and vice Versa

22
Q

What is economic growth?

A

An increase in the production of goods and services in an economy

23
Q

What is negative economic growth?

A

A decrease in the production of goods and services in an economy

24
Q

What are the causes of economic growth?

A
  • increase in the quantity of the factors of production
  • improvement in the quality of the factors of production
  • a combination of the two
25
Q

How can economic growth be shown on a PPF?

A

Outward shift in the PPF

26
Q

How can negative economic growth be shown on a PPF?

A

Inward shift in the PPF

27
Q

What are some reasons for negative economic growth?

A
  • natural disasters
  • political war
  • inefficient use of resources and labour
  • reduction in the level of skills in the workforce
  • underutilisation/ unemployed resources
28
Q

Define consumer goods

A

Goods which do not produce other goods. Use by people to satisfy their wants and needs.

29
Q

Define capital goods

A

Goods which are used to produce other goods and services

30
Q

How does an increase in capital goods affect the productive potential of an economy?

A

Increase in capital goods = long term increase in productive potential of economy

31
Q

Define positive economic statements

A

Economic stat,ents that can be proven true or false with statistics (objective)

32
Q

Define normative economic statements

A

Economic statements that express opinions and cannot be proven true or false (subjective)

33
Q

Words that indicate an economic statement is normative

A

Fair, unfair, should, ought, better, worse

34
Q

What is positive analysis

A

Data that allows you to state the facts and input stats

35
Q

What do governments do in decision making?

A
  • make value judgements on economic issues

- use positive analysis to help them make decisions

36
Q

What is a value judgement

A

A view of the rightness or wrongness of something, based on a personal view.

37
Q

Define specialisation

A

a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency

38
Q

When does specialisation occur?

A

When an individual, firm, region or countries concentrates on the production of a limited range of goods and services

39
Q

Why does specialisation allow individuals to become more skilled

A
  • Productivity and efficiency increase
  • quality increases
  • takes them less time to do something they know how to do
40
Q

Define division of labour

A

The specialization of labour in specific tasks, intended to increase productivity.

41
Q

What are the two methods of trading?

A

Barter and money

42
Q

What are the 5 functions of money and definitions

A
  • medium of exchange : something commonly accepted in exchange for goods and services
  • measure of value: the price of a good reveals its value
  • store of value: value is maintained and can be kept for a long time
  • method of deferred payment: allows debt to be created
  • unit of account: something that circulates and provides a standardised means of evaluating the relative price of goods and services
43
Q

What Is the difference between bartering and using money?

A

Bartering is The practice of exchanging one good or service for another without using money, whereas using money refers to a transaction

44
Q

Formula for unit cost

A

Unit cost= total production costs in period / total output in period

45
Q

Define constraints

A

Limits to what we can afford to consume

46
Q

Define factor incomes

A

the rewards to factors of production.

Economics (7 decks)

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