Production possibility frontiers

Question 1

What are capital goods?

Answer 1

-goods that are used to then create more goods
(E.g. machinery)

Question 2

What are consumer goods?

Answer 2

-the finished products that people buy
(E.g. clothing)

Question 3

What does a PPF line show?

Answer 3

-the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully used

Question 4

What are the four factors of production?

Answer 4

-capital
-enterprise
-labour
-land

Question 5

What can have an effect on land?

Answer 5

Bad weather

Question 6

What can have an effect on labour?

Answer 6

Immigrants move away

Question 7

What can have an effect on capital?

Answer 7

Viruses -> all machinery broke

Question 8

What can have an effect on enterprise?

Answer 8

No new ideas

Question 9

What is division of labour?

Answer 9

-specialisation of labour into separate tasks

Question 10

Why is division of labour good?

Answer 10

-ensures higher productivity per worker

Question 11

What is specialisation?

Answer 11

When a worker gets really good at one job and only perform within that sector

Question 12

Why is specialisation good?

Answer 12

Makes people more:
-skilled
-quicker
-reliable
-productive
Which leads to:
-more sales

Question 13

Why is specialisation bad?

Answer 13

Can make people:
-bored
-demand higher wages
-> also means no-one can do it if they’re not there

Question 14

What is country specialisation?

Answer 14

-when a country specialises its resources into producing a limited range of goods and services

Question 15

What is absolute advantage in country specialisation?

Answer 15

Being able to produce more of something than other countries
(Assuming they both have the same amount of FOP’s available)

Question 16

What is comparative advantage in country specialisation?

Answer 16

Being able to produce something at a much lower opportunity

Question 17

What are the pros of country specialisation?

Answer 17

-makes full use of resources
-increases output
-improves quality
-allows for exports

Question 18

What are the cons of country specialisation?

Answer 18

-world recession
-risk of over-specialising
-overuse of natural resources

Question 19

What is marginal utility?

Answer 19

The additional satisfaction a consumer gains from consuming one more unit of a good or service

Question 20

What is marginal utility used for?

Answer 20

Economists use it to determine how much of an item a consumer will actually buy

Question 21

What is consumer surplus?

Answer 21

The difference between the total amount that consumers are willing to pay and the total amount that they actually paid

Question 22

What is producer surplus?

Answer 22

The difference between the amount the producer is willing to supply and the actual amount they receive

Question 23

Define “diminishing marginal utility”

Answer 23

As the consumer consumes more of a product, their satisfaction decreases

Question 24

What are some potential issues with specialisation?

Answer 24

-what is there’s a recession?
-low cost competition
-what is everyone then works in the one industry?