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A-level Economics Micro Yr 12 > Pack 1: The Nature of Economics > Flashcards

Pack 1: The Nature of Economics Flashcards

1
Q

What is scarcity?

A

Resources are limited in supply and so cannot fulfil all the unlimited human wants

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2
Q

What are the classified world limited resources?

A

Land: includes resources underground/in sea and air
Labour: economy’s work force/skills/training they have
Capital: manufactured stock of tools, machines etc
Enterprise: skill entrepreneurs have, specifically in organizing other factors of production and taking risks by setting up business enterprises

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3
Q

What are non-renewable resources?

A

Will never be replaced once they are used e.g. coal

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4
Q

What are renewable resources?

A

Can be used and replaced, such as solar power

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5
Q

What is opportunity cost?

A

Value of the next best alternative foregone

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6
Q

What choices do governments have to make due to scarcity?

A
  • UK government have scarce amount of tax revenue to spend on the economy
    e.g spending on NHS means less to spend on schools
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7
Q

What choices do businesses have to make due scarcity?

A
  • scarce amount of finance to invest into their organizations
    e.g spending on advertising means less to spend on wages
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8
Q

What choices do consumers make due to scarcity?

A
  • households have scarce amount of income to spend on goods and services
    e.g spending on holidays means less to spend on a new car
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9
Q

What is a social science?

A
  • studies societies and the human interactions within those societies
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10
Q

What do economic models do and why are they used?

A
  • use assumptions to simplify reality in order to make insights into economics situation
  • uses assumptions in order to account for complex human behaviour and constantly changing variables
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11
Q

What is Ceteris Paribus?

A
  • all other things are held equal
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12
Q

Why is ceteris paribus used?

A
  • allows economists to simplify and explain causes and effects
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13
Q

What is a positive statement?

A
  • concerned with objective statement
  • based on evidence and tend to be statements of fact
  • can be proven to be true of false
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14
Q

What are Normative statements?

A
  • value judgement
  • subjective
    built around opinions/beliefs
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15
Q

What is the Production Possibility frontiers (PPF)?

A
  • an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production to produce only two goods/services
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16
Q

What is a consumer good?

A
  • goods/services that are used by people to saitisfy their need/wants
  • e.g TV
17
Q

What is a capital good?

A
  • goods used in production of other goods
  • e.g machines, factories
18
Q

How can a PPF be used to show efficiency, inefficiency, attainable and unattainable production?

A
  • Producing at any point on the curve represents productive efficiency
  • Any point inside the curve represents inefficiency
  • Using the current level of resources available, attainable production is any point on or inside the curve and any point outside the curve is unattainable
19
Q

How can economic growth be shown on a PPF curve?

A
  • outward shift
  • Economic growth occurs when there is an increase in the productive potential of an economy
  • shift is caused by an increase in the quality or quantity of the available factors of production
20
Q

How can the quality of a factor of production be improved?

A
  • the impact of training and education on labour.
  • An educated workforce is a more productive workforce and the production possibilities increase
21
Q

What is an example of how the quantity of a factor of production can be increased?

A
  • through a change in migration policies.
  • If an economy allows more foreign workers to work productively in the economy, then the production possibilities increase
22
Q

What causes economic decline?

A
  • when there is any impact on an economy that reduces the quantity or quality of the available factors of production
23
Q

What is the division of labour?

A
  • when a task is broken up into several component tasks
  • allows workers to specialise by focusing on one of the components that make up the production and thereby gain significant skill in doing it
  • results in higher output per worker and so increases productivity
24
Q

What are the Pros of Division of Labour and Specialisation?

A
  • Higher labour productivity lowers cost/unit for firms
  • Lower costs can be passed on to consumers in the form of lower prices
    -Lower costs can mean higher profits for the firms. This may lead to higher wagesfor workers
  • Increased productivity allows some firms to sell beyond their local market into international markets
  • creates many low skilled jobs
25
Q

What are the Cons of Division of Labour & Specialisation?

A
  • Task repetition often leads to boredom
  • decrease in motivation may lead to less productivity and/or poorer manufacturing quality
  • may increase worker turnover rates as workers look to move on to a role that is more stimulating
  • Mass produced products often lack variety and do not take different consumer preferences into account
  • if workers lose their jobs, then it may be hard for them to find work as they are only trained in one skill
26
Q

What four functions must money fulfil?

A
  • medium of exchange :to avoid double coincidence of wants
  • measure of value:allow buyers/sellers to arrange an agreeable exhange
  • store of value:allows money to be save
  • method of deferred payment:allows people to pay for things later
27
Q

What are the pros of Division of Labour & Specialisation in Trade?

A
  • Higher labour productivity lowers cost / unit for firms, which makes their goods more competitive internationally (exports)
  • Increased exports can result in economic growth for the nation
  • Economic growth usually leads to higher income and a better standard of living
  • Income gained from exports can be used to purchase other goods from around the world (imports). This increases the variety of goods available in a country
28
Q

What are the cons of the Division of Labour & Specialisation in Trade?

A
  • International trade is beneficial for the firms that can compete globally. However, some industries will be unable to compete and will go out of business
  • Many firms in an entire industry may close leading to structural unemployment
  • Specialisation may create over-dependency on other countries’ resources. This may cause problems if conflict arises.
  • Specialisation using a country’s own resources will lead to resource depletion over time.
29
Q

What is structural unemployment?

A
  • caused by a mismatch between workers skills and the available jobs in the economy
30
Q

What did Adam Smith believe?

A
  • advocate for free markets
  • competition between firms essential
  • see some role for the state in certain areas of the economy
31
Q

What did Karl Marx believe?

A
  • criticism of free market capitalism
  • capitalism would be replaced by communism
32
Q

What did Frederik Hayek believe?

A
  • supporter of the free market
  • deeply critical of socialism/communism
33
Q

What is a free market economy?

A
  • where scarce resources are allocated entirely by price mechanism
34
Q

What is a command economy?

A
  • where scarce resources are allocated entirely by the government
35
Q

What are Adv of free markets?

A
  1. Consumer choice
  2. Competition and efficiency
  3. Incentives/Economic growth (as less income tax)
36
Q

What are the Dis of free markets?

A
  1. Inequality: not state provision
  2. Market failure:
    - some goods over-provided e.g cigarettes
    - some goods under-provided e.g healthcare
37
Q

What are the adv of command economy?

A
  1. Guaranteed standard of living
  2. Solving market failure:
    gov intervention:
    - e.g providing public services
38
Q

What are the dis of command economies?

A
  1. lack of choice and freedom
  2. lower efficiency and economic growth : no profit motive
  3. Failure of large scale government: corruption

A-level Economics Micro Yr 12 (8 decks)

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