NATURE OF ECONOMICS

Question 1

What is meant by opportunity cost

Answer 1

Benefit given up of the next best alternative

Question 2

What are the factors of production

Answer 2

land, labour, capital, entrepreneurship

Question 3

What is the problem of scarcity / the economic problem

Answer 3

We have infinite wants but only scarce resources.

Question 4

Why isn’t money included as one of the four factors of production?

Answer 4

Factors of productions are resources which can be used to produce things.

Money can’t be used to produce anything. It can be used to buy factors of production, and those factors can be used to make things.

Question 5

What is the definition of Enterprise/Entrepreneurship

Answer 5

An entrepreneur combines and organises land, labour and capital to produce a good

Question 6

Definition of land

Answer 6

All the earth’s natural resources i.e. physical land but also raw materials

Question 7

Definition of labour

Answer 7

Human workers used to produce a good

Question 8

What happens to a ppf if unemployment increases

Answer 8

the ppf remains the same, we move to a point within the curve.

Question 9

What does a straight line ppf show

Answer 9

constant oppurtunity cost

Question 10

If Russia produces more capital goods now, in the future what will happen to its ppf curve

Answer 10

Russia’s ppf will shift outwards

Question 11

Opportunity cost diagram question

Question 12

Sketch the effects of swine flu on a PPF with constant opportunity cost for ham and vegetarian pizzas.

Question 13

describe a diagram to show the effects of improvements in fertiliser on a PPF for crops and fish.

Question 14

What does a ppf show

Answer 14

Shows all possible combinations of two goods that can be produced, using all resources efficiently

Question 15

What are the functions of money

Answer 15

deferred payment, unit of account, medium of exchange and store of value.

Question 16

What is meant by deferred payment

Answer 16

You can borrow money to buy goods now, and then pay the money back in the future

Question 17

However, specialisation can have negative effects if we over-specialise because

Answer 17

It means if there’s any big change in our economy, like coal mines being shut down, we struggle to adapt because we’re specialised in just one industry.

Question 18

An advantage of specialisation and trade is that:

Answer 18

We can produce more output. Because we’re all specialised in producing what we’re best at producing, we can make more stuff overall

Question 19

Definition of division of labour

Answer 19

When a firm splits up its production process into smaller separate tasks, and assigns different workers to each of these tasks.

Question 20

Write the definition of specialisation

Answer 20

When a worker, firm or economy concentrates on producing a limited range of goods and services.

Question 21

What is meant by unit of account

Answer 21

Money helps us compare prices of different products

Question 22

What are 3 pros about division of labour

Answer 22

Can increase productivity and output by specialising and using specialist equipment

Can decrease unit costs because workers are more efficient

Can help firms save on training costs because each worker needs to be trained in fewer skills

Question 23

What are 4 cons of division of labour

Answer 23

Demotivation can decrease productivity and output

Demotivation can decrease quality because workers will take less pride in their work

Can increase absenteeism, staff turnover and recruitment costs

Specialised workers will have only one skill so may end up unemployed if they lose their jobs

Question 24

Pros of specialisation and trade

Answer 24

Wider variety of goods and services from trade

Can increase overall output

Can increase trade

Question 25

Cons of specialisation and trade

Answer 25

if a region over-specialises and their specialist industry shuts down, workers will have no other work, leading to unemployment

countries can over-specialise and deplete their natural resources

We become vulnerable because if people specialised in producing a certain good or service go on strike or stop trading, we’re left without the goods and services we need

Question 26

Economists assume that consumers

Answer 26

Want to maximise utility (happiness)

Question 27

What is meant by herd behaviour

Answer 27

Consumers are influenced by the behaviour of others.

Question 28

What is meant by habitual behaviour

Answer 28

When consumers are in the habit of making certain decisions.

Question 29

Weakness at computation

Answer 29

Consumers are bad at making calculations, estimating probabilities and working out future benefits/costs.