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Economics > Term 1, 2021 > Flashcards

Term 1, 2021 Flashcards

1
Q

Want

A

a good or service beyond (surplus) to our needs, which we gain satisfaction from.

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2
Q

4 Factors of Production

A

Labour, Capital, Land, Enterprise

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3
Q

Land

A

natural resources

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4
Q

Labour

A

mental and physical human input

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5
Q

Capital

A

man-made resources

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6
Q

Enterprise

A

risk-takers who initiate and manage production by combining the other 3 FoP in attempt to make a profit

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7
Q

Economic Problem

A

Limited Resources + Unlimited Wants = Scarcity

∴ Choice

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8
Q

4 Questions an Economy must address

A

What to produce?
How to produce?
For whom to produce?
How much to produce?

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9
Q

Opportunity Cost

A

is the value of the next best alternative foregone when a choice is made.

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10
Q

Who makes Economic Decisions?

A

Consumers

Producers

Government

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11
Q

Consumer Sovereignty

A

consumer needs and wants determine the production of goods and services.

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12
Q

Production Possibility Curve/Frontier

A

represents all the different output variations of an economy at its maximum production potential.

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13
Q

Assumptions of a PPC/PPF

A

All available resources are used

There are only two goods/services produced

Resources can be allocated to either good/service

Resources and Technology are fixed/constant

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14
Q

Allocative Efficiency

A

allocating resources to produce maximum benefits for the producer, consumer and country.

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15
Q

Productive/Technical Efficiency

A

production is at a maximum whilst at the lowest average cost (spot on the PPC/PPF)

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16
Q

Productivity

A

a measure of efficiency for production expressed as a rate of output per unit of input.

17
Q

Capitalist Economy

A

an ideology based on the market system, private ownership and limited government intervention. It believes the economy can thrive through individual motives. (free enterprise) (e.g. USA)

18
Q

Mixed Economy

A

an economy that utilizes both government intervention and the market system. (e.g. Australia)

19
Q

Socialist Economy

A

an ideology based on publicly owned production to benefit the whole community. (e.g. modern-day China)

20
Q

Subsistence Economy

A

an economy with no market and mostly production for individual use. (e.g. remote Arctic regions)

21
Q

Economic Model

A

a simple illustration of a complex, real-world situation

22
Q

Ceteris Paribus

A

A Latin phrase meaning ‘all other things being equal’

23
Q

GDP (Aggregate Demand) Equation

A

Consumption + Investment + Government Expenditure + (Exports - Imports)

C + I + G + (X - M)

24
Q

Savings

A

Household income saved for the future (e.g. saving money in the bank)

25
Q

Investment

A

Producer creation of goods not for current consumption, but for future profit (e.g. buying a new factory)

26
Q

GDP

A

The measure of the monetary value of the final goods and services a country produces. It is a measure of economic health.

27
Q

Aggregate Supply

A

The total value of goods and services produced and available in an economy in a given period of time.

28
Q

Demand

A

The amount of a good or service that consumers are willing and able to buy at a given price.

29
Q

Law of Demand

A

There is an inverse relationship between price and quantity demanded. For example, if the price increases, consumers demand less.

30
Q

Determinants of Demand

A 
Income 
Number of buyers (population)
Substitute goods (competitive wants)
Expectations (confidence)
Complementary goods (cheaper pencils increase demand for rubbers)
Tastes
31
Q

Supply

A

The amount of a good or service that producers are willing and able to sell at a given price.

32
Q

Law of Supply

A

There is a positive relationship between price and quantity supplied. For example, if the price increases, producers supply more.

33
Q

Determinants of Supply

A 
Alternative goods (farmer grows cotton instead of wheat) 
Unexpected events 
Number of sellers
Technology
Cost
Joint supply (cow for beef and hide)
34
Q

Price Elasticity of Demand

A

The responsiveness of quantity demanded to a change in price.

35
Q

Determinants of Elasticity

A

Many substitutes (unessential)
Large part of the budget (expensive)
Luxury good

36
Q

Determinants of Inelasticity

A

Few substitutes (essential)
Small part of the budget (inexpensive)
Necessity or habit

37
Q

Relative to 1

A

PED < 1 = Relatively Inelastic

PED = 1 = Unit Elasticity

PED > 1 = Relatively Elastic

38
Q

Formula for Elasticity

A

[(new Quantity - old Quantity) / old Quantity] / [(new Price - old Price) / old Price]

39
Q

Characteristics of Wants

A

Wants are unlimited

Wants are recurrent

Wants are complementary

Wants are competitive

Wants are habitual

Wants are alternative

Economics (4 decks)

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