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Economics Edexcel iGCSE > The Economic Problem & Labour Market > Flashcards

The Economic Problem & Labour Market Flashcards

1
Q

What does the basic economic problem involve?

A

Involves deciding how to allocate a nation’s scare resources between different uses

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2
Q

The Basic Economic Problem: Name 3 decisions it involves making (Qs)

A
  1. Who will get them?
  2. What goods and services to produce?
  3. How will they produce them?
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3
Q

What is scarcity?

A

Unlimited wants but limited resources

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4
Q

What is opportunity cost?

A

The benefit lost from the next best alternative (we choose to go without)

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5
Q

When is an opportunity cost incurred (PPC wise)?

A

When moving from one point to another on the PPC

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6
Q

What are 2 parts of value & what do we want?

A
  • Benefits
  • Cost

We want:

  • Greatest benefit
  • Lowest cost
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7
Q

What is a Production Possibility Curve?

A

A diagram showing different possible combinations of two goods that can be produced using available resources

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8
Q

What is a point OUTSIDE the PPC called & what does this mean?

A

Unattainable - Isn’t achievable using the current level of resources

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9
Q

What is a point ON the PPC called & what does this mean?

A

Maximum efficiency - All resources are being used = productivity is efficient

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10
Q

What is a point INSIDE the PPC called & what does this mean?

A

Not all resources are being used = productively inefficient

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11
Q

Illustrate an increase in resources on a PPC

A
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12
Q

Illustrate an opportunity cost on a PPC

A
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13
Q

What is a mixed economy?

A

Both private and public sector organisations provide goods and services

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14
Q

Name 3 advantages of a mixed economy

A
  • No demerit goods
  • Social welfare
  • Public services
    • Wide variety of goods and services both public and private
  • Resources will not be overused
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15
Q

Name 3 disadvantages of a mixed economy

A
  • People have to pay taxes
  • Business may be limited to the products they can produce
  • May be some corruption
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16
Q

What is meant by types of economies (aka economic systems)?

A

The method used by a society to produce and distribute goods and services

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17
Q

Private Sector: For whom to produce?

A

Sold to anyone who can afford them

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18
Q

Private Sector: What to produce?

A
  • Provides most goods (e.g. food & clothes)
  • Market system ensures that firms only produce goods people want
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19
Q

Private Sector: How to produce?

A

Completing firms choose production methods that maximise quality & minimise costs

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20
Q

Public Sector: How to produce?

A
  • Services are provided by government organisations
  • Decide how services should be provided efficiently
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21
Q

Public Sector: What to produce?

A

Provides services such as education and healthcare because firms in private sector may under-provide them

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22
Q

Public Sector: For whom to produce?

A

Services are provided free to everyone and are paid for mainly from taxes

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23
Q

What is a free market economy?

A

Where the government does not interfere in business activity in any way

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24
Q

In a free market economy, who provides the goods and services and how are they distributed?

A

Private sector firms provide most of goods and services, which are distributed by market forces

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25
Q

In a free market economy, who answers the economic questions?I

A

Individual buyers and sellers

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26
Q

In a free market economy, what drives the economy?

A

Motive for profit

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27
Q

Name 3 features of a free market economy

A
  • Competition
  • Economic Freedom
  • Private Property
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28
Q

Name 3 advantages of a free market economy

A
  • Cheaper prices, high quality products and reduced prices ∵ there’s higher competition
  • Wide variety of goods and services
  • No taxes
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29
Q

Name 3 disadvantages of a free market economy

A
  • Demerit goods may be produced
  • High prices due to no government intervention
  • Wages may be lower as there’s no minimum wage
  • No public services
  • No social welfare
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30
Q

What is a command/planned economy?

A

Government regulation of business practices

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31
Q

Name 3 advantages of a command/planned economy

A
  • Prevent Monopolies
  • Low unemployment
  • Maximise welfare
  • Resources are quickly and efficiently mobilised on a large scale
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32
Q

Explain why’d there be low unemployment in a command/planned economy

A

Can provide everyone with a job and salary

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33
Q

Explain why’d welfare would be maximised in a command/planned economy

A
  • Can prevent inequality and distribute income fairly
  • Ensure production of goods that people need and are beneficial to society
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34
Q

Name 3 disadvantages of a command/planned economy

A
  • Poor decision making
  • Restricted Choice
  • Black market increases due to governmental restrictions
  • Employees are restricted in what type of work they do and for how long
35
Q

Explain why’d there be poor decision making in a command/planned economy

A

Lack of information = governments make poor (& slow) decisions about what’s needed to be produced

36
Q

Explain how there would be restricted choice in a command/planned economy

A

Consumers have limited choice in what hey can consume + firms will make what they’re told to make

37
Q

Why do economies ensure production is efficient?

A

Resources are scare

38
Q

Name 3 ways we can increase efficiency

A
  • Minimise resources used in production
  • Minimise costs
  • Only produce goods that are needed
39
Q

Name 2 ways the public sector can increase efficiency

A

Set performance targets or pay private sector to supply government services

40
Q

When does market failure occur?

A

Occurs when resources are not allocated efficiently

41
Q

Name 4 times when resources are not allocated efficiently (in a Mixed Economy)

A
  • Missing Markets
  • Negative Externalities
  • Merit Goods
  • Lack of Competition
42
Q

What is meant by missing markets?

A

Public goods (e.g. defence or policing) are not provided by private sector

43
Q

How can merit goods not be allocated efficiently?

A

Such as education and healthcare are under-provided by private sector

44
Q

Explain what is meant by a lack of competition

A
  • In markets dominated by one firm = consumers may be exploited
    • Leads to higher prices and less choice
45
Q

Who deals with market failure?

A

Public sector

46
Q

Describe how the public sector deals with market failure

A

Provides public and merit goods to ensure that competition exists and penalise those who impose costs on society

47
Q

What is division of labour?

A

Assigning different parts of a manufacturing process or task to different people in order to improve efficiency

48
Q

Name 3 advantages of division of labour to the worker

A
  • Workers become experts and can find employment more easily
  • People may experience more job satisfaction and may have better promotion prospects
  • Higher rates of pay can be earned if workers are experts
  • People may become more skilled and enjoy a higher status at work
49
Q

Name 3 disadvantages of division of labour to the worker

A
  • People can become demoralised through repeating tasks and may lose interest in their work
  • Unemployment if repetitive tasks are taken over by machines
  • Unemployment ∵ a specialist skill is no longer required because demand has fallen
50
Q

Name 3 advantages of division of labour to the firm

A
  • Greater efficiency because workers practise their tasks repeatedly and become experts
  • Production time is reduced because workers don’t have to move form one task to another
  • Organisation is easier because each worker fits into a structured production process
  • Greater use of specialist tools and equipment which improves efficiency
51
Q

Name 3 disadvantages of division of labour to the firm

A
  • A lack of flexibility might exist if workers cannot be switched between jobs
  • Productivity and quality might fall if tasks too boring and repetitive
  • If a specialists is absent & can’t be replaced the whole production process may halt
  • Chance of over production
52
Q

What is wage determination?

A

Wage rate in a labour market is determined by interaction of supply and demand for labour

53
Q

What is equilibrium wage rate?

A

Amount of money that workers are willing to work for = business are willing to pay for workers

54
Q

What is a salary?

A

Fixed amount of money an employee receives per year

55
Q

Why do firms want workers who are well trained?

A

∵ productivity will be higher

56
Q

How can the quality of human capital be improved?

A

With investment in training and education

57
Q

Name 4 factors that affect the demand for labour (Non-Wage)

A
  • Factor Substitutions (costs and availability of substitutes)
  • Consumer’s demand increases (demand for goods)
  • Labour Productivity
  • State of Economy
58
Q

Explain how labour productivity affects the demand for labour

A

If workers can produce more output = demand for labour increases

59
Q

Explain how factor substitutions affects the demand for labour

A

When technology replaces human workforce = demand for labour will decrease

60
Q

Explain how the state of the economy affects the demand for labour

A
  • During times of rescission
    • Demand for labour will decrease
  • During a boom in economy
    • Demand for labour will increase
61
Q

Name 6 factors that affect the supply for labour (Non-Wage)

A
  • Level of Qualification
  • Population
  • Health
  • Changes in school leaving age or retirement age
  • Working Environment
  • Net Migration
62
Q

What is the public sector?

A

Companies owned and run by government

63
Q

What is the private sector?

A

Companies owned and run by individuals

64
Q

What is the income gap?

A

Difference between high income earners and low income earners

65
Q

Illustrate wage determination in a labour market

A
66
Q

What is a minimum wage?

A

Minimum amount of a employee must receive for their work (set by government)

67
Q

What happens to demand for labour when a minimum wage legislation is put into place?

A

As wages increase = demand decreases (costs business more)

68
Q

What happens to supply of labour when a minimum wage legislation is put into place?

A

Wages increase = supply increases (workers will earn more)

69
Q

Name 2 ways a minimum wage legislation affects the government

A
  • Increase in accumulation of tax
  • Pay less on merit goods
70
Q

Name 3 reasons for a minimum wage legislation

A
  • To reduce poverty
  • To benefit disadvantaged workers
  • To help businesses
71
Q

Explain how a minimum wage legislation can help businesses

A
  • A minimum wage should promote greater equality and
    fairness among workers
    • ∴ worker motivation will improve
72
Q

Illustrate the effect of a minimum wage legislation

A
73
Q

What is a trade union?

A

Organisations that represent people at work

74
Q

What is a trade union’s purpose?

A

To protect and improve people’s pay and conditions of employment + campaign for law which benefit working people

75
Q

Name 4 things trade unions do

A
  • Negotiate pay and working conditions with employees
  • Provide legal protection by e.g. representing workers in court
  • Provide information and advice
  • Provide member services e.g. Training
76
Q

What is employee turnover?

A

Amount of employees that are let go or leave their job over a period

77
Q

Name 2 advantages of trade unions to employer

A
  • Disputes solved quickly
  • Better working relationship
78
Q

How do trade unions force up wages?

A
  1. Apply pressure on employers by threatening industrial action if their wage demands are not met
  2. Employers give in to trade unions to avoid disruption to their businesses
79
Q

What is the downside of trade unions forcing up wages?

A

May cause unemployment amounts their members ∵ employers may reduce demand for workers at the higher wage level

80
Q

By forcing up wages, trade unions may cause unemployment amounts their members. How can this be avoided? (2x)

A
  • If labour productivity rises
  • If employers charge customers more or cut their profit margins
81
Q

What is collective bargaining?

A

When group of workers come together to negotiate issues with their employer

82
Q

What are entrepreneurs?

A

A person who sets up a business/businesses and takes finical risks in hope for profit

83
Q

What are resources?

A

Something that is used to make goods or services

Economics Edexcel iGCSE (8 decks)

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