Section A

Question 1

Principle agent problem

Answer 1

Principal agent problem is an asymmetric problem that stems from a divorce between ownership and control that is found in many businesses and other organisations as a result of having different objectives.

Question 2

Productively efficient

Question 3

Allocatively efficient

Question 4

Cost-benefit analysis

Answer 4

A decision making tool accounting for the social costs and social benefits of projects over time to establish a net present value which has four stages to compelte.

Question 5

Internalising Externalities

Answer 5

Transfering costs that are currently paid by those who do not cause them to those who are responsible

Question 6

Internalising Externalities

Answer 6

Transfering costs that are currently paid by those who do not cause them to those who are responsible

Question 7

Economic growth

Answer 7

An increase in the amount of goods and services ( or real GDP ) produced over a period of time

Question 8

Economic development

Answer 8

The process of importing people’s economic well-being and quality of life

Related to but distinct from economic growth

Question 9

Economic growth can lead to economic development by improving the standard of living, output, employment and income

Question 10

Marginal revenue product

Answer 10

The additional to totall revenue as a result of employing one more worker

Question 11

Equity

Answer 11

The idea of fairness or justice, such as in terms of the distribution of output

Question 12

Equality

Answer 12

The idea of all members of a group or society having the same rights and responsibilities

Question 13

Prisoner’s deilemma

Answer 13

A prisoner’s dilemma is a situation where individual decision-makers always have an incentive to choose in a way that creates a less than optimal outcome for the individuals as a group.

Question 14

Behavioural economics

Answer 14

The branch of economics that attempts to explain the decisions and choices individuals make in practice .

Question 15

Dynamic efficiency

Question 16

GDP

Question 17

gni

Answer 17

The total output produced by a country’s citizens wherever they produce it

Question 18

Ways of calculating GDP 3

Answer 18

Output method
income method
expenditure method

Question 19

MEW (MEASURABLE ECPNOMIC WELFARE),

Answer 19

A composite measure of living standards that adjusts GDP for factors that reduce living standards that improve living standards

Question 20

HDI human development index

Answer 20

A composite measure of living standards that includes gni per head, education and life expectancy

Question 21

MPI multidimensional poverty index

Answer 21

Measures the deprivation in terms of the proportion of households that lack the requirements for a reasonable standard of living

Question 22

Nudge Theory

Answer 22

Nudge Theory is based upon the idea that by shaping the environment, also known as the choice architecture, one can influence the likelihood that one option is chosen over another by individuals. A key factor of Nudge Theory is the ability for an individual to maintain freedom of choice and to feel in control of the decisions they make.