Nature Of Economies (Y12 & Y13)

Question 1

social science?

Answer 1

study of how people make decisions and interact

Question 2

ceteris paribus?

Answer 2

‘all other things held at constant’

Question 3

economics as a social science?

Answer 3

It looks at the way in which other people interact and how they behave with eachother.

-difficult to test.
- because many different factors can change

Question 4

economic methodology?

Answer 4

1. observation
2. forming a hypothesis
3. predictions
   4.test predictions

If hypothesis survives the test , supported by evidence its becomes a theory.

Question 5

positive statement?

Answer 5

• can be tested using evidence
• objective
• fact based

Question 6

normative statement?

Answer 6

value judgement (an opinion)
cannot be tested

Question 7

role in policy making:

Answer 7

policy decisions –> value judgements
e.g David Cameron received data predictions of how increasing uni fees would save tax payers billions each year , his final decision was normative (is it better to keep it low or high) in the end he said it would be best to help the tax payer.

Question 8

moral and political judgements:

Answer 8

value judgements - these are influenced by moral and political judgement

Question 9

renewable and non-renewable energy resources:

Answer 9

renewable = can replenish
non- renewable = will not replenish

Question 10

the economic problem:

Answer 10

• infinite wants
• finite or scarce resources
  (so we have to make choices)

Question 11

opportunity cost:

Answer 11

benefit given up of the next best alternative

Question 12

what is an economy?

Answer 12

any system that tries to solve the economic problem or the problem of scarcity

Question 13

the 3 questions:

Answer 13

what?
how?
for whom?

Question 14

factors of production:

Answer 14

• land
• labour
• capital
• enterprise

Question 15

productivity?

Answer 15

how much output is produced by a factor of production

labour productivity:
how much output is produced by labour in a given period of time.

Question 16

productive efficiency?

Answer 16

is when the economy producing along its PPFs
using all resources to full potential

Question 17

allocative efficiency?

Answer 17

is when economy maximises welfare

Question 18

shifts in PPFs

Answer 18

Economic growth caused by an
increase in factors of production
available in an economy can cause
the PPC to shift outwards and to the
right.

This will result in an increase in the
productive capacity of the economy
from PPC to PPC1 i.e. greater output
can be produced.

Question 19

consumer goods?

Answer 19

goods we consume

Question 20

capital goods?

Answer 20

used to produce consumer goods

Question 21

productivity?

Answer 21

how much output is produced by a factor of of production.

Question 22

labour productivity?

Answer 22

how much output is produced by labour in a given period time

Question 23

specialisation and division of labour:

Answer 23

• split of production process
• smaller separate tasks
• assign different workers to each task

which allows specialisation.

Question 24

money:

Answer 24

medium of exchange
we can sell stuff we specialise in good or service —> sell for money—> spend on other goods.

Question 25

pros of specialisation and division of labour

Answer 25

• increases output
• increases quantity
• reduce unit costs
• saves on training

Question 26

cons of specialisation and division of labour

Answer 26

• demotivation
• absenteeism (Absence of an employee from work without a valid reasons)
• employee turnover (rate at which employees leave a company and need to be replaced by new hires)

Question 27

specialisation in trade:

Answer 27

• division of labour within firms
• also specialisation across countries
• trade between countries

Question 28

pros on specialisation in trade:

Answer 28

-more variety
- more output
- more trade

Question 29

cons on specialisation in trade:

Answer 29

• over-specialisation (when an individual becomes high skilled or knowledgeable in a very specific area)
• natural resource depletion (Excessive use of essential resources which can lead to environmental problems and scarcity of these resources in the future)
• vulnerable

Question 30

what is PPFs?

Answer 30

production possibility frontier (PPF):
- shows us all the possible combinations of two goods we can produce
- use our resources efficiently

outside ppf: - impossible
inside ppf: - productively inefficient
on the line - productively efficient

Question 31

opportunity cost?

Answer 31

the benefit given up of the next best alternative.

Question 32

productive efficiency?

Answer 32

when an economy producing along its ppf

Question 33

allocative efficiency?

Answer 33

when an economy maximises welfare

Question 34

economic growth?

Answer 34

an expansion in the productive capacity of an economy.

Question 35

2 main reasons economic growth tends to happen:

Answer 35

• increasing the quantity of factors of production (e.g more farming = more land)
• increase in quality of factors of production
  ( farming = better technology)