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A Level Economics > Slatman Theme 1 > Flashcards

Slatman Theme 1 Flashcards

1
Q

Why is rent expensive

A

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

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2
Q

What is a normative statement?

A

A subjective statement

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3
Q

What is a positive statement?

A

Based on evidence e.g “it will lead to a rise in demand”

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4
Q

What does a PPF show?

A

A PPF shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully exploited

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5
Q

What type of resources are available?

A

(Cell)
Land resources
Capital resources - production facilities e.g tractors
Labour - workers
Enterprise - entrepreneurs

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6
Q

How can you increase the PPF?

A

By increasing the land resources, labour resources, capital resources, or enterprise resources

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7
Q

How would you increase the land resource exploitment?

A

Drilling more oil, more farms, mining

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8
Q

How do you increase your labour resources?

A

Give more training bonuses to encourage better work, increase immigration, bring in younger employees

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9
Q

How would you increase your capital resources?

A

Use artificial intelligence, investment

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10
Q

How would you increase your enterprise?

A

Increased investment in education like universities

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11
Q

What would cause the PPF to move inwards?

A
  • 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
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12
Q

What is division of labour?

A

Specialisation of labour into separate tasks
This insures higher productivity per worker

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13
Q

Productivity definition

A

Control your inputs in maximise your outputs

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14
Q

Advantages of division of labour

A
  • 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
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15
Q

Disadvantages of division of labour

A
  • 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
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16
Q

Absolute advantage definition

A

Being able to produce more of something than another country (assuming both have the same amount of resources)

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17
Q

Comparative advantage definition

A

Be able to produce something at a much lower opportunity cost than another country

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18
Q

How would you workout opportunity cost for media if the resources are mechanics and media

A

Mechanics / media gives u media
Whoever has the lowest opportunity cost has the comparative advantage

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19
Q

What are the functions of money?

A

A medium of exchange
A measure of value (price tags)
A store of value (weekly wages)
A method of settling debts

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20
Q

What did Karl Marx believe?

A

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

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21
Q

Why was marx right and wrong?

A

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

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22
Q

What did Adam Smith believe?

A

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

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23
Q

Why was Adam Smith right?

A

The market only produces what’s wanted - no waste
Encourages trade
Firms are efficient (lower cost)
Lots of innovation and new products

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24
Q

Why was Adam Smith wrong?

A

One person/firm controls everything
Cuts off the poor
Encourages demerit goods

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25
Q

What did Hayek believe?

A

Only buyers and sellers understand the market
The government shouldn’t intervene with the market

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26
Q

What is the negative impact on the economy of the government introducing a minimum wage?

A

The cost for a business increases so price of product increases so customer finds alternative goods for lower price in another country

27
Q

What is a free-market?

A

Buyers and sellers decide how the market works

28
Q

What is a centralised economy?

A

The government decide on production and distribute it

29
Q

What is a mixed economy?

A

An economy which has some government intervention

30
Q

How much competition is in a free-market economy, a command economy, and a mixed economy

A

Free M - some
Command - none
Mixed economy - some

31
Q

How many demerit goods are in a market economy, command economy and mixed economy?

A

FM - some
Command - none
Mixed - some

32
Q

Negatives of a command economy

A

Poor efficiency / no strive for quality
No competition - so poor quality and shortages
No entrepreneurs
No profit incentive so no innovations, so the economy will struggle to grow

33
Q

What is market failure

A

When the market fails to allocate resources affectively

34
Q

What are negative externalities

A

When a third-party is negatively affected by a market transaction

35
Q

What is the socially optimum point

A

The money that should’ve been spent to cover the negative externalities

36
Q

What are the negative externalities of a housing estate?

A

Increased traffic pollution and less job opportunities

37
Q

What is a positive externality?

A

A product which has a positive impact on the third-party

38
Q

Examples of positive externalities for an electric car

A

Reduce your carbon emission, which will be beneficial to the people around you

39
Q

What are subsidies

A

Subsidies refer to direct payments to the government provide businesses to offset some of their operating costs

40
Q

What are the benefits for giving subsidies to public transport firms?

A

Provides people with education
Reduced congestion and carbon footprint

41
Q

What are the negatives for giving subsidies to public transport firms?

A

Increased tax having to be paid to cover costs
People will use the subsidy, even if they don’t need it
Less money spent on other essentials like the NHS (opportunity cost)
Produces become reliant on subsidies
Negative externalities of increased supply

42
Q

Positives of a command economy

A

Every one is equal - equal wages
There are many public goods available as they are not profit driven
Low unemployment
Less demerit goods

43
Q

Reasons for providing subsidies for public transport

A

Provides more people with a way to school
Reduced congestion and carbon footprint
Lower prices so more sales

44
Q

Cons of paying subsidies

A

Producers can become “subsidy dependent”
Subsidies can distort resource allocation.
Subsidies can lead to excess production / surpluses.
Environmental risks from excessive production
Opportunity cost as less money spent on other essentials
Increased tax having to be paid to cover costs

45
Q

What is maximum pricing

A

When a price is set which the market will not be allowed to go above

46
Q

Pros of max pricing

A

More affordable for low income consumers
Consumers can spend more on other necessities
Prevents unfair pricing
More spending elsewhere as they have more money to spend

47
Q

Against max pricing

A

Less profits for producer- so less reinvestment
There will be shortages
If firms get a lower price, there may be less incentive to supply the good, and the number of properties on the market declines
Rich will get it even if they don’t need it

48
Q

What is minimum pricing

A

Setting a floor price which the market is not allowed to go under

49
Q

Reasons for minimum pricing

A

Effective means of reducing consumption
Increased revenue

50
Q

Cons of minimum pricing

A

There will be a surplus

51
Q

What is flax tax

A

Imposed on firms but can be passed on through higher prices

52
Q

Why does a flat tax work

A

Should decrease the quantity consumed if intended, if inelastic though it won’t change consumption much

53
Q

Reasons against sugar tax

A

Too many exceptions
Impacts low income families the most

54
Q

What is ad valerom

A

Percentage tax

55
Q

What is carbon trading

A

A system of limiting carbon emissions through granting firms permits to emit a certain amount of carbon

56
Q

Alternatives of using a pollution permit to reduce carbon emissions

A

Carbon tax

57
Q

What is consumer surplus

A

A consumer surplus happens when the price that consumers pay for a product or service is less than the price they’re willing to pay

58
Q

What is a producer surplus

A

A producer surplus is the difference between the amount the producer is willing to supply and the actual amount they receive

59
Q

Why is it important to know your producer and consumer surplus?

A

Because it allows you to see the welfare gain to society and how much better off we are to certain goods and services

60
Q

What are the different methods of government intervention

A

Taxation
Subsidies
Max pricing
Min pricing
Carbon trading
Carbon tax
Making the good a public good ( avoids the free rider problem)
Regulation
Provision of information to reduce asymmetric information

61
Q

Advantages and disadvantages of the provision of information to reduce market failure

A

+ consumer can act rationally
- can be expensive to do so opportunity cost

62
Q

Why is min pricing such an effective way of affecting the market

A

As prices are higher there is the rationing signal to consumers to reduce consumption.

63
Q

What is a producer surplus

A

Producer surplus is the total amount that a producer benefits from producing and selling a quantity of a good at the market price

64
Q

What’s the purpose of the price mechanisms

A

To remove shortages and surpluses

A Level Economics (5 decks)

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