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Economics > Section 1 and 2 (excluding PED,PES) > Flashcards

Section 1 and 2 (excluding PED,PES) Flashcards

1
Q

Scarcity definition

A

situation where there is not enough to satisfy wants and needs

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2
Q

Define factors of production

A

resources used to produce goods

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3
Q

Name factors of production (4)

A

land, labour, capital, enterprise

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4
Q

Define the economic problem (2)

A

scarcity

unlimited wants but limited resources

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5
Q

Define a free good (2)

A

good which does not use up any resources in production

has no opportunity cost

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6
Q

Define an economic good (2)

A

good which uses scarce resources in production

has an opportunity cost

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7
Q

Define land

A

gifts of nature available for production

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8
Q

Examples of land (2)

A

timber, coal

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9
Q

Define labour

A

human effort used in producing goods

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10
Q

Define capital

A

man-made goods used to produce other goods/services

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11
Q

Examples of capital (2)

A

factories

machinery

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12
Q

Define enterprise (2)

A

risk taking and decision making required to set up a business

managed other 3 factors of production

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13
Q

Define occupational mobility

A

ability to move resource between different uses

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14
Q

Define geographical mobility

A

ability to move a resource between different locations

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15
Q

Define labour mobility (2)

A

ability of labour to move locations

ability of labour to switch between different occupations

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16
Q

Define capital mobility (2)

A

ability to move capital between different locations

ability to move capital between different uses

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17
Q

Define capital depreciation (2)

A

loss in value of capital from it becoming worn out or obsolete

calculated by replacement value

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18
Q

(Gross) investment definition

A

spending by firms on capital

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19
Q

Net investment definition (2)

A

gross investment - depreciation

value of extra capital goods made

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20
Q

Define opportunity cost

A

next best alternative foregone when a decision is made

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21
Q

Define PPC curve (2)

A

curve that shows maximum possible output of 2 different goods/services that can be produced with given resources

curve that illustrates opportunity cost

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22
Q

Define microeconomics (2)

A

study of behaviour of individuals and firms

studies performance of individual markets

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23
Q

Define macroeconomics

A

study of whole economy

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24
Q

Define economic agents

A

decision makers/actors in economy

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25
Q

Examples of economic agents (3)

A

individuals

governments

firms

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26
Q

Define planned economic system (3)

A

economic system

government makes all key economic decisions

resources are state-owned and allocated by directives

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27
Q

Define a market economic system (3)

A

system where resources are privately owned

resources allocated by market forces

firms decide what to produce based on consumer demand

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28
Q

Define price mechanism

A

how supply and demand interacts through price to allocate resources

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29
Q

Define demand

A

the quantity that consumers are willing and able to purchase at any given price

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30
Q

Define supply

A

the quantity that produces are willing and able to sell at any given price

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31
Q

Define market equilibrium

A

situation where quantity demanded is equal to quantity supplied

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32
Q

Define market disequilibrium (2)

A

situation where quantity demanded is not equal to quantity supplied

surplus or shortage exists at current price

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33
Q

Define contraction in demand/supply

A

movement along demand/supply curve resulting in decrease of quantity demanded/supplied

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34
Q

Define extension in demand/supply

A

movement along demand/supply curve resulting in increase of quantity demanded/supplied

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35
Q

Define normal good

A

product which demand increases when income increases

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36
Q

Define inferior good

A

product which demand decreases when income increases

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37
Q

Examples of inferior good

A

spam

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38
Q

Define a substitute good

A

product that can be used in place of another

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39
Q

Define a complement good

A

product that can be used together with another product

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40
Q

Define shortage

A

when quantity demanded exceeds quantity supplied

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41
Q

Define surplus

A

when quantity supplied exceeds quantity demanded

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42
Q

Define public sector

A

part of economy controlled by government

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43
Q

Define private sector

A

part of economy owned/controlled by individuals

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44
Q

Define state-owned enterprises

A

firms owned by government that sell goods/services

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45
Q

Define privatisation

A

selling of public sector assets to government

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46
Q

Define market failure

A

when free market delivers inefficient allocation of resources

47
Q

Define third parties

A

those not involved in production/consumption of good/service

48
Q

Define external costs

A

costs paid by third parties related to production/consumption of good

49
Q

Define external benefits

A

benefits gained by third parties from production/consumption of good/service

50
Q

Define private costs

A

costs of production paid by firm

51
Q

Define private benefits

A

benefits of consumption enjoyed by consumers

52
Q

Define social cost

A

private cost + external cost

53
Q

Define social optimum (2)

A

efficient allocation of resources

resources allocated to maximise social welfare

54
Q

Define merit goods (2)

A

goods generally good for consumer/wider society

under consumed on free market

55
Q

Define demerit goods (2)

A

goods harmful for consumer

overconsumed on free market

56
Q

Define free rider

A

someone who consumes good/service without paying for it

57
Q

Define non-excludable

A

when it is not possible to stop someone from enjoying good/service

58
Q

Define public goods

A

a product which is non-excludable and needs to be provided by government

59
Q

Define monopoly

A

a single seller in the market

60
Q

Define mixed economic system (2)

A

economy where both public and private sectors play important roles

economy which posseses both qualities of a market economy and a planned economy

61
Q

Define subsidy

A

payments by government to producers per unit of good produced

62
Q

Define nationalisation

A

when a private sector firm/industry is moved to public sector and becomes under government control

63
Q

Define capital good

A

human-made goods used in production

64
Q

Define consumer good

A

goods consumed for their own satisfaction

65
Q

Cause for geographical immobility of labour (5)

A

difference in price/availability of housing in different areas/countries

family ties

difference in educational system

lack of information - unaware of job opportunities in different place

lack of skill/qualifications

66
Q

Which factor of production is the most mobile

A

enterprise

67
Q

Determinants for quantity of labour (5)

A

population size

age structure of population

retirement age

school leaving age

attitude ot working women

68
Q

Define labour force (2)

A

people working

people actively seeking work

69
Q

Define productivity

A

output per factor of production in an hour

70
Q

Define labour productivity

A

output per worker in an hour

71
Q

Determinants of number of hours people work (5)

A

length of average working day

duration of overtime

length of holidays

amount of times lost through sickness

whether they work full-time or part-time

72
Q

How to improve quality of labour (4)

A

better education

better training

more experience

better healthcare

73
Q

How quality of capital can improve

A

better technology

74
Q

How to increase quantity of entrpereneurs (3)

A

good education system

lower taxes on firm’s profits

reduce government regulations

75
Q

Improve quality of enterprise (4)

A

better education

better training

better healthcare

more experience

76
Q

Reward/Payment of labour

A

wages

77
Q

Reward/Payment of land

A

rent

78
Q

Reward/Payment of capital

A

interest

79
Q

Reward/Payment of enterprise

A

profit

80
Q

What does a point inside a PPC curve mean

A

inidicates unemployed resources

81
Q

What does a point on a PPC curve mean

A

shows full use of resources

82
Q

What does a movement along a PPC curve mean (2)

A

shows reallocation of resources

opportunity cost involved

83
Q

What does a bowed out PPC curve show

A

increasing opportunity cost

84
Q

What does a linear PPC curve show

A

constant opportunity cost

85
Q

What does a outward shift in the PPC curve mean (2)

A

increase in quantity/quality of resources

increase in productive potential

86
Q

3 key allocation decisions

A

what to produce

how to produce it

for whom to produce

87
Q

What will a fall in price cause for demand

A

demand will increase as people are more willing and able to buy the good

88
Q

Determinants of demand (7)

A

income

price of substitutes

price of complements

advertising campaigns

changes in tastes/fashions

changes in size of population

changes in age of population

89
Q

Meaning of outward shift in demand curve

A

increase in demand

90
Q

Meaning of inward shift in demand curve

A

decrease in demand

91
Q

Demand relationship to price (3)

A

increase in price –> fall in demand

decrease in price –> increase in demand

inverse relationship to price

92
Q

Supply relationship to price (3)

A

increase in price —> increase in supply

decrease in price –> decrease in supply

direct relationship to price

93
Q

Determinants of supply (6)

A

changes in costs of production (influenced by tax/subsidy)

technology improvements

weather conditions

changes in price of other products (substitute, complements)

disaster/war

discovery/depletion of commodities

94
Q

Outward shift in supply

A

increase in supply

95
Q

Inward shift of supply

A

decrease in supply

96
Q

what happens if price is below equilibrium price

A

excess demand

97
Q

what happens if price is above equilibrium price

A

excess supply

98
Q

What does competition result in (2)

A

lower prices

higher quality goods

99
Q

Market economic system advantages (4)

A

consumers have greater choice

incentives encourage hard work and enterprise

efficient allocation of resources

lowers price and higher quality

100
Q

Market economic system disadvantages (3)

A

output not reflect full costs/benefits

private sector firms can abuse their power (monopoly)

causes income inequality

101
Q

Causes of market failure (7)

A

failure to take into account all costs/benefits

overconsumption of certain goods - demerit goods

underconsumption of certain goods - merit goods

lack of competition - monopolies

immobility of resources

lack of information - may pay too much

public goods not provided

102
Q

Mixed economy benefits (4)

A

governments can encourage consumption of merit goods

governments can dissuade consumption of demerit goods

develop more resources to capital goods

creates more even distribution of income

103
Q

Definition of maximum price (2)

A

price set below equilibrium price

allows consumers to be more willing/able to buy certain product

104
Q

Cause of maximum price (3)

A

market disequilibrium - shortage

rationing - limit on amount to be consumed

queuing - first come first serve

105
Q

Define minimum price (2)

A

encourage production of product

set above equilibrium

106
Q

Government measures to address market failure (6)

A

subsidy - can influence production of goods as firms more willing to produce with lower costs

tax - can influence production of goods as firms less willing to produce with greater costs

competition policy - promotes competitive pressure to prevent firms abusing their power

fines and restriction placed on firms which exceed pollution level

direct provision - governments can provide goods they think are essential or beneficial

fairness - financial assistance to the poor and balance out income levels

107
Q

Effect of subsidy/tax on elastic demand

A

subsidy/tax will have greater impact on quantity sold with less price

108
Q

Effect of subsidy/tax on inelastic demand

A

subsidy/tax will have less impact on quantity sold

109
Q

Regulation benefits (2)

A

backed up by law

easy to understand

110
Q

Regulation disadvantages (2)

A

regulations have to be followed –> expensive and time consuming

government can become unpopular

111
Q

Benefits of state-owned enterprises (3)

A

base their decisions on full costs and benefits involved

ensures that basic industries charge low prices and high quality

government makes planning and coordination easier

112
Q

Disadvantages of state-owned enterprises (2)

A

inefficient - high prices and low quality

can be difficult to control as they are large

113
Q

Example of a free good

A

sunshine

Economics (4 decks)

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