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Economics > Nature Of Economics > Flashcards

Nature Of Economics Flashcards

1
Q

What is economics?

A

Economics is a social science that studies societies into human interactions within those societies.

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2
Q

Define the term model in economics.

A

Model is the simplified version of reality.

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3
Q

What does ceteris paribus mean?

A

ceteris paribus means that all other variables remain constant.

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4
Q

What is empirical research?

A

 Empirical research is when data is collected through surveys, opinion polls and observations.

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5
Q

How do economists build models?

A

By identifying variables to study, making assumptions and simplify complex interactions.

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6
Q

What is the purpose of economic models?

A

To better understand the certain interactions within the societies.

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7
Q

What is the difference between correlation and causation in economics?

A

Correlation in economics refers to a relationship between variables, while causation implies that one variable directly causes a change in an another.

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8
Q

What is positive economics?

A

Positive economics is only concerned with objective statements about how economy or market works.

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9
Q

What is normative economics?

A

Normative economics focuses on value judgements about what is the best economic policies and solutions should be.

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10
Q

What are value judgements?

A

Value judgements in economics are opinions viewpoints and beliefs. Cannot be proven. 

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11
Q

What is the effect of value judgements?

A

Value judgements influence economic decision by affecting choices made by individuals, businesses and government.

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12
Q

 What is the basic economic problem?

A

The basic economic problem is that the resources are finite, and human wants are infinite.

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13
Q

What are the factors of production?

A

Factors of production are the resources used in the production of goods and services: land, labour, enterprise, capital.

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14
Q

What is the opportunity cost?

A

Opportunity cost is the best next alternative foregone and making a decision.

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15
Q

How does scarcity affect prices in free market?

A

The scarcer the resource, the higher the price.

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16
Q

What is production possibility frontier(PPF)?

A

A production possibility frontier is an economic model that shows the maximum possible production combinations of two economic goods that an economy can produce using all of its factors of production fully and efficiently.

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17
Q

What causes a outward shift on the PPF?

A

An outward shift of the PPF is caused by economic growth, which increases the product of potential of an economy through an increase in the quantity or quality of resources of production.

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18
Q

What are consumer goods?

A

Consumer goods are and products that have no future productive use, such as food or clothing.

19
Q

What are capital goods?

A

Capital of us are assets help a firm or a nation to reduce output, such as machinery, technology or equipment.

20
Q

What is consumer surplus?

A

The difference between the amount consumers are willing to pay and can actually pay.

21
Q

What is consumer surplus?

A

The difference between the amount consumers are willing to pay and can actually pay.

22
Q

Dynamic pricing

A

A pricing strategy where prices are adjusted in real-time based on current demand, competition and other external factors.

23
Q

Limited capacity

A

The maximum output or service that a business or venue can provide, constrained by physical or operational limits.

24
Q

Price elasticity of Demand

A

A measure of how much the quantity demanded of a good responds to a change in its price.

25
Q

Price gouging

A

Raising prices to unfair or exploitative levels, especially during emergencies or when consumers have limited alternatives.

26
Q

Profit Maximisation

A

The process by which a business determines the price and production level that returns the greatest profit.

27
Q

Profit Motive

A

The incentive that drives individuals or businesses to increase their financial gain through their actions or decisions.

28
Q

What is division of labour?

A

The division of labour is when a job is broken down into several component tasks.

29
Q

Define specialisation.

A

When worker focus on one or a few component tasks in the production process.

30
Q

What is an advantage of the division of labour?

A

An advantage of division of labour is higher labour productivity which lowers the cost per unit for firms.

31
Q

What is an advantage of the division of labour?

A

An advantage of division of labour is higher labour productivity which lowers the cost per unit for firms.

32
Q

What is a disadvantage of specialisation in production?

A

Specialisation leads to boredom because of repetition and decreases workers motivation.

33
Q

What are the four functions of money?

A

A medium of exchange, a measure of value, a store of value, a method of deferred payment

34
Q

What are the limits of application of the division of labour?

A
  • the size of market (small = difficult to specialise);
  • the type of product (unique fashion products);
  • transport costs (if they are high the division of labour is not possible)
35
Q

Who is considered to be the father of Economics?

A

Adam Smith

36
Q

What is the law of demand?

A

There is an inverse relationship between price and quantity demanded. As price increases, quantity demand decreases and vice versa assuming.

37
Q

Moving along the line when the price goes up?

A

Contraction of demand

38
Q

Moving down the line when the price goes up?

A

Extension of demand

39
Q

How to explain the income effect?

A

As Prices go up our income and purchasing power cant stretch as far therefore we are less able to buy. Our income maybe doesn’t allow us to buy the same quantity of services as before so demand contracts and we demand less.

40
Q

What is this substitution effect?

A

Prices go up and services become more price competitive switch our demand towards buying those goods and services instead.

41
Q

What’s the law of supply?

A

There is a direct relationship between price and quantity supplied. As price increases, quantity supplied increases.

42
Q

What is free market?

A

Any place where buyers meet suppliers to exchange goods and services, free from government intervention.

43
Q

In a free market prices..

A
  1. Allocate resources efficiently
  2. Ration scarce resources by encouraging, discouraging consumption
  3. Signal excess demand/supply for more or less resources
  4. Incentivise producers to increase or decrease output to increase profit

Economics (2 decks)

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