The allocation of resources

Question 1

diffrenciate micro and macro economics

Answer 1

micro: the study of the decisions and behaviour of households and firms and the performance of individual markers

macro: the study of the whole economy, eg changes in the countries output.

Question 2

who are economic agents

Answer 2

those who undertake economic activities and make economic decisions. governments, households, firms

Question 3

what are the 3 economic questions

Answer 3

what to produce
how to produce
who to produce for

Question 4

what’s an economic system?

Answer 4

the institutions, organisations, and mehanisms that influence economic behaviour and determine how resources are allocated

Question 5

describe the 3 types of economic systems

Answer 5

market: consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privatey owned

planned: the government makes the crucial decisions, land and capital are state owned and resources are allocated by directives

mixed: both private and public sectores play an important role

Question 6

Diffenciate normal and inferior goods

Answer 6

normal: a product whose demand increases as incomes increase

inferior: a product whose demand decreases when incomes increase

Question 7

name causes of change in demand

Answer 7

1) changes in income
2)changes in price of related products
3)advertising campaihhnes
4)changes in population
5)changes in tastes in fashion

Question 8

name causes of change in supply

Answer 8

1) changes in cost of production: caused by a change in price of FoP or change in their productivity.

2) improvements in technology

3) taxes

4)subsidy

5)weather conditions and health of crops

6) prices of other products

7) disasters and wars

8) discoveries and depletions of commodities

Question 9

PED=

Answer 9

percentage change in Qd/ percentage change in price

Question 10

percentage change in Qd=

Answer 10

change in demand/ original demand * 100

Question 11

name the determinants of PED

Answer 11

1) Availibility of substitues
2) Propotion of price to income
3) Neccesity/ luxury
4) addictive
5) whether purchase can be delayed
6) How narrowly defined it is
7) time period under consideration

Question 13

What determines PES

Answer 13

1. Time taken to produce
2. Cost of altering supply
3. Feasibility of storing