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economics paper 1 > nature of economics > Flashcards

nature of economics Flashcards

1
Q

ceteris paribus

A

all other things being equal

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2
Q

positive statement meaning

A

objective statement that can be tested for. it can be accepted or denied

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3
Q

normative statement meaning

A

subjective statement which is a value based judgement

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4
Q

scarce resources meaning

A

resources that are limited in supply

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5
Q

needs meaning

A

minimum that is necessary for a person to survive

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6
Q

basic economic problem

A

infinite wants and scarce resources

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7
Q

opportunity cost meaning

A

Next best alternative forgone

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8
Q

renewable resources meaning

A

resources that can be repeatedly exploited as they have the potential to renew themselves

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9
Q

non-renewable resources meaning

A

resources which once exploited cannot be replaced

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10
Q

sustainable resources meaning

A

resources which can be exploited in a way that they will not run out

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11
Q

4 factors of production

A

land
labour
capital
enterprise

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12
Q

land meaning

A

natural resources available for production

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13
Q

labour meaning

A

human input into the production process

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14
Q

human capital meaning

A

value of the productive potential of a worker

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15
Q

capital meaning

A

stock of manufactured resources used in the production process

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16
Q

enterprise meaning

A

individuals seeking out profitable opportunities for production and taking risks in an attempt to make a profit. organise production

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17
Q

Production possibility frontiers meaning

A

a curve that shows the maximum combinations of 2 goods or services that can be produced when all resources are fully and efficiently employed
Productive capacity of an economy

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18
Q

law of diminishing marginal returns meaning

A

after a certain point adding additional factor of production results a smaller increase in output

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19
Q

what causes an outwards shift in the PPF

A

increased productivity - increases output per input
better management of FOP- increase efficency, decrease waste
increasing the FOP
discovery of new raw materials
tech advancements- better machinery

20
Q

what causes an inwards shift in the PPF

A

labour leaving the country
damaging FOP e.g. war , natural disasters
lack of investment
lack of natural resources

21
Q

consumer goods meaning

A

goods and services that are used by people to satisfy their needs and wants

22
Q

capital goods meaning

A

goods that are used in the production of other goods

23
Q

what does it mean when production is taking place on the line

A

that all the resources are being used efficiently

24
Q

productive efficiency meaning

A

production takes place at the lowest cost

25
Q

allocative efficiency meaning

A

social welfare is maximised.

26
Q

specialisation meaning

A

when an individual/ firm/ country produce a narrow range of goods

27
Q

pro of specialisation

A

increased productivity as person can focus on improving one skill
better quality goods
decrease costs

28
Q

con of specialisation

A

mass production of standardised goods
lack of variety for consumer
change in demand could lead to a loss
overspecialisation can lead to structural unemployment
Alienation
Decrease production as repetitive
One person fails whole production process stoped

29
Q

division of labour meaning

A

when labour becomes specialised in a particular part of the production process

30
Q

division of labour pro

A

cost effective as labour becomes specialised and each person doesn’t require every tool
time efficient as workers aren’t changing tasks
narrow range of skill so increases their productivity
more profits
increase in wages
workers become experts at their field

31
Q

division of labour con

A

lack of motivation- lower productivity
less pride in work- lower quality
dissatisfaction from work causes high turnover
limited skill set- structural unemployment
standardised goods
breakdown in the chain stops whole production process

32
Q

functions of money

A

medium of exchange
measure of value
store of value
method of deferred payment

33
Q

medium of exchange meaning

A

can be used to buy and sell goods and services and is accepted everywhere

34
Q

measure of value meaning

A

compares value of 2 goods
puts value on labour

35
Q

store of value meaning

A

able to keep its value and can be kept for a long time

36
Q

method of deferred payment meaning

A

allows for debts to be created
people can pay of things without having money

37
Q

function of an economy

A

what to produce
how is it produced
for whom is it to be produced

38
Q

free market economy meaning

A

where there is little to no government intervention and scarce resources are allocated by the market mechanisms of supply and demand

39
Q

pro of free market

A

economic efficiency as high competition
quality and innovation as competition
freedom of choice as variety of goods available
high motivation- more work = more money
political freedom
high rates of economic growth

40
Q

con of free market

A

high levels of income and wealth inequality
lack of merit goods
little control of merit goods
wasted resources e.g. ads
monopolies
negative externalities
volatile economic cycle
high risk
no welfare

41
Q

command economy meaning

A

where government allocates resources

42
Q

command economy pro

A

more income and wealth equality
less wastage
standardised products are cost effective
gov motivated by well being of people

43
Q

command economy con

A

lack of motivation and efficiency as same wage
lack of innovation
lack of choice
many decisions to be made lead to slow growth and wrong choices

44
Q

mixed economy meaning

A

both free markets mechanisms and the government allocate scarce resources and factors of production

45
Q

role of the gov in a mixed economy

A

create rules and regulations
provide merit and public goods
limit demerit goods
correct market failure
provide welfare
decrease inequality

economics paper 1 (9 decks)

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