saturday- second hour of AS revision Flashcards
what are the 4 functions of money
medium of exchange
unit of account
store of value
method of deferred payment
how can money act as a medium of exchange
how can money act as a unit of account
how can money act as a store of value
how can money act as a method of deferred payment
what are the 3 types of economies?
free market
command
mixed
what is a command economy?
what is a free market?
adv of command economy
disadv of command economy
what is a mixed economy
which type of economy does adam smith favour and why
which economy did Karl Marx favour and why
adv of free market economy
disadv of free market economy
what is the role for the state in a mixed economy
what is utility?
welfare or satisfaction gained from consumption of goods/ services
what is rational behaviour
what is total utility?
the total amount of wellbeing a person gains from one product
what is marginal utility
wellbeing gained from consuming another unit
what do firms and consumers seek?
firms seek to maximise profits
consumers seek to maximise their utility
what is the law of diminishing marginal utility?
explanation for the inverse relationship between price and quantity demanded
which is why demand curve is downward sloping
as consumption increases, the utility derived from each additional unit declines
what is demand
something youre willing and able to buy
what is supply
why is the supply curve upward sloping
recall the factors affecting supply
productivity of labour
indirect tax
number of firms
technology
subsidy
weather
how does indirect tax affect supply
is a tax on production
increase indirect tax, decrease supply
what is the definition of AD
the total demand for goods and services produced in an economy at a given price level
measures how much is being spent by all economic agents in the economy
formula for AD
C + I + G + (X-M)
what is investment
covers investment spending on fixed capital by firms and also working capital (purchases required to produce goods)
what are the characteristics of AD?
purchasing power
interest rates
exports/imports
why is purchasing power of peoples incomes higher when price is low?
why are interest rates lower when prices are low?
why are UK prices more competitive when prices are low?
what does ceteris paribus mean?
all other influencing factors are held constant
what sorts of goods does consumption include?
what is MPC
measure of how much an additional unit of income is spent
richer= lower MPC as they have lots of money
poorer= higher MPC
how do you calculate MPC
how can MPC be used as evaluation
if govt wants to increase consumption by e.g reducing taxes, depends on MPC
what are the factors affecting consumption
changes in taxation
consumer confidence
interest rates
availability of credit
populations
wealth effect
inflation expectations
employment
what is capital stock
the capacity of a firm to produce
how are C + I linked
how does animal spirits and the paradox of thrift affect investment
how does economic growth affect investment
how does business expectations and confidence affect investment
how does demand for exports affect investment
how does interest rates affect investment
how does access to credit affect investment
how does regulation affect investment
what is the accelerator effect
The accelerator effect happens when an increase in national income (GDP) results in a proportionately larger rise in capital investment spending. In other words, we often see a surge in capital spending by businesses when an economy is growing quite strongly
