Slatman Theme 1 Flashcards
Why is rent expensive
Limited housing supply - demand exceeds supply in popular areas
- high property prices - expensive for landlords to buy the property
- High living costs - landlords increase the price to cover these costs
What is a normative statement?
A subjective statement
What is a positive statement?
Based on evidence e.g “it will lead to a rise in demand”
What does a PPF show?
A PPF shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully exploited
What type of resources are available?
(Cell)
Land resources
Capital resources - production facilities e.g tractors
Labour - workers
Enterprise - entrepreneurs
How can you increase the PPF?
By increasing the land resources, labour resources, capital resources, or enterprise resources
How would you increase the land resource exploitment?
Drilling more oil, more farms, mining
How do you increase your labour resources?
Give more training bonuses to encourage better work, increase immigration, bring in younger employees
How would you increase your capital resources?
Use artificial intelligence, investment
How would you increase your enterprise?
Increased investment in education like universities
What would cause the PPF to move inwards?
- Land resources - a reduction in the production of oil, climate change (extreme weather)
- Labour resources - immigration laws made stricter, lack of attention to staff training, emigration (people moving away so losing highly skilled workers), constant strikes
- Capital resources - technology stops working/machines break, factories leave the UK, rise in resource price (firms can’t afford the new technology)
- Enterprise resources - lack of education investment, emigration
What is division of labour?
Specialisation of labour into separate tasks
This insures higher productivity per worker
Productivity definition
Control your inputs in maximise your outputs
Advantages of division of labour
- higher quality of goods and services
- quicker as specialists know exactly what to do so less time is wasted
- Staff get better and more efficient
Disadvantages of division of labour
- if specialist is absent itcauses issues as no one else can perform their role
- higher wages to be paid
- Hard to replace
- Staff can lose motivation
Absolute advantage definition
Being able to produce more of something than another country (assuming both have the same amount of resources)
Comparative advantage definition
Be able to produce something at a much lower opportunity cost than another country
How would you workout opportunity cost for media if the resources are mechanics and media
Mechanics / media gives u media
Whoever has the lowest opportunity cost has the comparative advantage
What are the functions of money?
A medium of exchange
A measure of value (price tags)
A store of value (weekly wages)
A method of settling debts
What did Karl Marx believe?
he was against the idea of capitalism and capitalists controlling the capital
He believed they were motivated solely by profits
They pay poor wages
The rich get richer and the poor get poorer
And he believed it was better to share the wealth equally
Why was marx right and wrong?
Why the was right:
Lots of people in poverty
The gap between rich and poor is increased
Why he was wrong:
Capitalists take the risk so they deserve the reward
There is a minimum wage, so they get paid fairly now
Consumers benefit from increase profit
What did Adam Smith believe?
The wealth of nations
Self interest - everyone is benefiting from each other’s self interest
Circular flow of income
Risk and reward
Trade leaves us all better off
He was a complete capitalist
Why was Adam Smith right?
The market only produces what’s wanted - no waste
Encourages trade
Firms are efficient (lower cost)
Lots of innovation and new products
Why was Adam Smith wrong?
One person/firm controls everything
Cuts off the poor
Encourages demerit goods
What did Hayek believe?
Only buyers and sellers understand the market
The government shouldn’t intervene with the market