revision workbook year 1

Question 1

explain the basic economic problem

Answer 1

there are unlimited wants but limited resources for example scarcity therefore deschions need to be made about resource allocation

Question 2

explain the likely impact on the ppf of a natural disaster such as floods in India

Answer 2

inward shift in ppf as fewer consumer and capital goods can be produced due to desctrution of farming plots

Question 3

the ppf is an economic model of the economy explain why assumptions are made in economics models

Answer 3

one reason why assumptions are made in models is to simplify a more complex reality for example it can be useful to keep some variables constant to model impact of only one variable at a time such as by using ceteris paribus

Question 4

a free market economy defo

Answer 4

is one where scare resources are allocated by the price mechanism

Question 5

explain why it is aims to ensure money is a store of value explain why beneficial

Answer 5

allows for you to save money

they can do this because if money holds it value over time they can still purchase the same amount of good in the future using their savings.

Question 6

utility maximisation

Answer 6

attempting to get the highest amount of welfare possible

Question 7

profit maximisation

Answer 7

attempting to get the largest difference between total revenue and total coat

Question 8

explain how price mechanisms can eliminate surpluses in commodity market s

Answer 8

a surplus supply means that quantity supplied exceeds quantity demanded the price mechanism will cause the price the commodity to fall this will lead to an expansion in demand and a contraction in supply therefore eliminating the surplus

Question 9

short run

Answer 9

is a time period where at least one factor of production is fixed

Question 10

long run

Answer 10

is a time period where all factors of production are variable

Question 11

what are private goods

Answer 11

goods that are rivals nd excludable

Question 12

private cost

Answer 12

the cost directly to the consumers and producers

Question 13

private benefit

Answer 13

the benefit directly to consumers and producers

Question 14

free rider problem market failure occurring when free markets are left to provide public goods

Answer 14

where the price mechanisms fails to allocate resources effiecntly

public goods are under provided by free markets

the free rider problem is that it is possible for people to consume a good without paying for it once it is provided

therefore there os little incentive for producers to provide public goods due to an inability to make a profit

Question 15

why is it hard to estimate social benefit

Answer 15

difficult in estimating monetary values for all external benefits

Question 16

define minimum price

Answer 16

price set by the government which a good/service cannot fall below

Question 17

minimum price effect on quantity demanded

Answer 17

falls

Question 18

minimum price effect on quantity supplied

Answer 18

raises

Question 19

minimum on excess supply

Answer 19

increases

Question 20

explain the impact on excess supply if ped and yes for barely are more inelastic

Answer 20

excess supply will be smaller

demand will contract less as ped is inelastic

supply will expand lesss as per is inelastic

Question 21

explain one function of price mechanisms

Answer 21

incentive function