mock revision Flashcards
what are the factors of production
land
labour
capital
enterprise
what is opportunity cost
cost of giving up the best alternative when a choice is made
what is division of labour
specialisation of individuals in a work force
what are the advantages and disadvantages in the division of labour
advantages : gain skill more productive more cost effective quicker disadvantages: no sense of ownership quality issues boredom of workers
what is demand
quantity of a good or services that consumers are able and willing to buy at various prices
what are the conditions of demand
change in population
change in disposable income
price and availability of other goods
change in taste and preferences
what is consumer surplus
difference between what consumers are willing to pay and the price they actually pay
what is producer surplus
difference between what sellers are willing to sell product for and the price they actually do sell them for
what is supply
quantity of a good that suppliers are able and willing to sell at any given price
what shifts supply
change in cost of production
change in technology
change in price of substitutes
government tax
what are complements
goods which are demanded together
a rise in the quantity demanded of one will lead to an increase in demand for another
what are substitutes
goods which replace each other
rise in price of one will lead to rise in demand for another
what is derived demand
goods that are demanded for production of other goods
what is composite demand
goods which are demanded for two or more purposes
what is joint supply
one good supplied for two different purposes
what is PED
price elasticity of demand measures responsiveness to demand after a change in price
what is the equation of PED
% change in quantity demanded / % change in price
what is the elasticity of a product if its PED is between 0-1
inelastic
what is the elasticity of a product if its PED is more than 1
elastic
what is YED
measures responsiveness of demand to a change in income
what is the equation of YED
% change in quantity demands / % change in income
what is a normal good
brought more of when income goes up
what YED do normal goods have
positive between 0 -1
what has a YED of above 1
luxury goods
what YED do inferior goods have
negative yed
what is XED
measures demand for one good in responsive to a change in price of another good
what is the equation for XED
% change in quantity demanded for good X / % change in price of good Y
What XED do substitutes have
positive
what XED does complements have
negative
if XED is positive and more than 1 they are?
strong substitutes
if XED is negative and less than -1 they are?
weak complements
why is the demand curve for labour downward sloping
as wage rate rises firms will cut back on employment
what causes a shift in demand for labour
changes in productivity changes in revenue by a firm rise in customer demand change in price of good employment subsidy
what does the elasticity of labour depend on
time -the longer the time the easier to substitute labour for capital
labour costs as % of total costs
ease and cost of factor substitution
PED
why is the supply curve for labour backward sloping
at high levels of income workers prefer to work shorter hours rather than receiving extra income
what does the elasticity of labour depend on
time - elasticity lower in short run
availability of suitable labour - easier to get unskilled workers
unemployment
what are the withdrawals from the circular flow
savings
tax
imports
what are the injections from the circular flow
investment
government spending
exports
what is aggregate demand
total of all demand curves in the economy
what is AD made up of
consumption
investment
government spending
net exports (exports - imports)
what causes shift in the AD curve
change in any variable of ad
eg . unemployment cuts consumption
what is aggregate supply
total of all supply curves in the economy
what causes shifts in the short run AS curve
wage rates raw material prices taxation exchange rate productivity
what causes shifts in the long run AS curve
technological advances productivity in competing economies change in skill and education demographic changes competition policy
