PPF DIAGRAM SPECIALISATION ETC Flashcards
social science meaning
a group of academic disciplines that examine society and see how they interact and develop as a culture
- why do people react in different ways?
- why’s it impossible to conduct experiments in eco?
- why do people react differently?
they are not homogenous
impossible to conduct experiments known as behavioral economics
people react differently due to selection and observational bias
what is economic model
simplified representation of reality that is used to provide an insight into economic decisions and events
what is ceterus paribus
we focus on changes in one variable whilst all other influences are kept constant
what is positive statement
what is normative statement
mcqs can test you on the differences between
positive statement is a objective/no judgement. Can be tested with evidence (will, has, done)
normative statement is value judgment cannot be tested with evidence is a opinion (should, ought)
governments use value judgements for
policy decisions
why do policymakers use value judgements
wide range of decisions so not all can be tested so policy makers use value judgements to make policy decisions.
what is the economic problem
scarce resources and unlimited needs and wants
factors of production + explain
CELL
CAPTIAL- manufactured stock of stools, machines etc. used in the production of goods and services
ENTERPRISE-skills entrepreneurs have and the risk they are willing to take
LAND-not just physical land but sea, underground and air
LABOUR-set of skills and training the economy’s workforce has.
non-renewable resources meaning
resources that will never be replaced once used
e.g. coal, copper, oil
renewable resources meaning
resources that can be replaced once used
e.g. solar power, wind power
scarcity meaning
resources are limited in supply so cannot fulfill unlimited human needs and wants
what is opportunity cost
value of the next best alternative foregone
what are goods that have no opportunity cost called
free goods e.g. the air we breathe (unless we pollute it significantly)
what are goods that are scare with opportunity cost called
economic goods
what is production possibility frontier PPF
economic model maximum combination of goods and services produced in a given time with resources being allocated efficiently.
what are consumer goods
goods that are used by people to satisfy their needs and wants such as: houses, TV
what are capital goods
goods that are used in the production of other goods e.g. machines, factories, infrastructure
points on the ppf can be …
points within the ppf can be…
moving towards ppf …
any points outside the ppf…
fully employed or economically efficient
points within ppf are inefficient or unemployed
economy is increasing to fully employed
points outside unfeasible or unobtainable
unless economic growth where sacrificing living standards in the short run
opportunity cost inside ppf ?
no
opportunity cost ON the PPF
yes OC on ppf
it is not possible to increase the output of one good without increasing the output of the other good
opportunity cost on straight line
straight line ppf can suggest
constant
straight line ppf can suggest individual worker
what happens if the ppf shifts outwards
ppf shifts outwards there is an increase in the quality or quantity of the factors of production hence economic growth
to move along the ppf…
reallocation of resources
e.g. because governments want to increase the welfare of their citizens.
to shift the ppf
increase in quality or quantity of factors of production
what is specialisation
individuals, firms and economies focus on producing goods and services in which they have an advantage in
specialization results in 2 things
productivity increases
increased risk for economic agents as specializing rather than diversifying
money must fulfill 4 functions
m/m/mv/v
money of deferred payment: money must link to different time periods when saved and borrowed.
medium of exchange: buy and sell goods to overcome the double coincidence of wants
measure of value: something £20 and something £10 we know the first is twice as valuable
store of value: people can defer spending and use it later on in same time periods
what is division of labour
production process broken down into a sequence of stages where workers assigned too particular stages.
higher output + productivity = ?
higher output + productivity means= lower cost per unit
lower cost per unit is what firms want as it
-saves wage costs
-aids living standards
-economic growth
higher productivity means
- more jobs available workers can specialize in specific tasks they do best, specific task is more skilled
- less time wasted from moving one job to another
- time saved in training workers
what does monotony of work mean
and possible consequences
when workers are assigned to specialize in a limited tasks and their work may become monotonous and boring
- lower quality of work, lower productivity
- higher cost per unit
- increased staff turnover more people leaving the business
lower productivity means
- lower quality of work, lower productivity
- higher cost per unit
- increased staff turnover more people leaving the business
chance of structural employment
greater independence
chance of structural employment means
breaking down into different parts means workers are more likely to be replaced by machines
AS A RESULT/ THEREFORE/ CONSEQUENTLY
workers are unemplyed in one sector of the economy
e.g. ship building
tasks reply on each other.if production process breaks down it would damage a firms reputation and products may be delayed
what has trade done to firms and countries
may them more interdependent and reliant for each other for their success.
overspecializing results in
increased risk as not diversifying e.g,bmw lower productivity less sales less profit germany eco growth decrease rise in unemployment
what is free market
mixed economy
command economy
scarce resources allocated entirely by price mechanism (consumers and suppliers)
scarce resources allocated by price mechanism and government
scarce resources allocated entirely by the government
adv and disadv of free markets
adv
firms compete for profits to become more economically efficient
-no or low corporation tax greater incentive to work fuels higher economic growth
dis
inequality no gov benefits or public servies
MARKET FAILURE- resources not allocated efficiently
e.g. goods under provided care+education
adv and disadv of command economy
adv
guaranteed standard of living
solving market failure e.g. promoting equality, goods services for poor
tackling goods with negative externalities like alcohol and cigarettes
disadvantages
lack of choice and freedom government divide which goods to produce rather than consumers
-lower economic growth as there is no incentive/ no profit motive.
mixed economy adv + disadv (small)
some closer to free markets and some closer to command economy
solves market failure and provides minimum standard of living
e.g. government providing public good
