Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Microeconomics Theme 1 > The nature of economics > Flashcards

The nature of economics Flashcards

1
Q

Positive Statement

A

statements based on evidence or facts that can be proved or disproved.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Normative Statement

A

statements based on value judgements and cannot be proved or disproved.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

ceteris paribus

A

All other things (factors) remaining the same’
The assumption that all other variables within a model remain constant whilst the change is being considered.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is The Economic Problem?

A

Resources are scarce but wants are infinite

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How do they solve the economic problem

A

working out what to produce, how to produce it and for whom production should take place.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Scarcity

A

The world’s resources are limited, there are only limited amounts of land, water, oil, food, etc..

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Who are the economic agents

A

Consumer, Business and Governments.
Agents involved in Economic transactions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Four factors of production

A

Land, Labour, Capital, Enterprise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Land

A

includes all natural resources, raw materials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Labour

A

human effort involved in production of goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Capital

A

any man-made aid to production including machinery, factory buildings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Enterprise

A

involves an entrepreneur taking risks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

renewable resources

A

A resource whose stock level can be replenished naturally over a period of time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

non-renewable resources

A

will eventually be depleted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

define opportunity cost

A

loss of the next best alternative when making a decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the importance of opportunity costs to economic agents?

A

Due to the problem of scarcity, choices have to be made about how to best allocate limited resources amongst competing wants and needs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Economic Goods

A

resources limited in supply and so are scarce.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Free goods

A

Goods that are unlimited in supply and therefore have no opportunity cost.
e.g sunlight

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Define production possibility frontiers

A

illustrates the maximum potential output of an economy when all resources are fully employed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define economic growth

A

Increase in an economy’s productive potential.

21
Q

Define economic decline

A

Decrease in an economy’s productive potential.

22
Q

Define division of labour

A

Specialisation of workers on specific tasks in the production process.

23
Q

Define specialisation

A

The process of breaking down the production process into steps and then each worker is assigned a step

24
Q

Adam Smith

A

The Father of Economics;
- The Invisible Hand (workings of the Price Mechanism)
- Specialisation
- Increase in Division of Labour

25
Q

Advantages of specialisation and division of labour in production

A
  • each worker specialises in tasks for which that worker is best suited
  • training costs are lower, one task
  • Less time wasted because a worker doesn’t have to move from one task to another
26
Q

Disadvantages of specialisation and division of labour in production

A
  • Monotony and boredom of workers= decrease in productivity
  • loss of skills = limited skills
27
Q

Advantages of specialisation and division of labour in trade

A

one country’s specialisation in the production = trades with another country = benefit from increased output, greater choices and lower prices.

28
Q

Disadvantages of specialisation and division of labour in trades

A

country becomes over-dependent on imported goods and services.

29
Q

What are the limits to the division of labour

A
  • Size of market: smaller market makes it more difficult to specialise.
  • type of product: designer fashion products are unique and not suitable for dol.
  • transport costs: high = dol not possible
30
Q

What is money

A

Anything which is acceptable to a wide number of people and organisations as payment for goods and services.

31
Q

What are the four functions of money

A
  • a medium of exchange
  • a store of value
  • a measure of value
  • a means of deferred payments
32
Q

How is money used as a medium of exchange

A

exchanging the money earned from doing a specialist job for the goods and services they wish to buy.

33
Q

How is money used as a store of value

A

enabling people to save in order to buy goods in the future

34
Q

How is money used as a measure of value

A

assess the value of different goods and services by comparing prices.

35
Q

How is money used as a means of deferred payments

A

enabling people to buy goods and pay for them on credit

36
Q

Define a free market economy

A

prices are determined by supply and demand with no government intervention.

37
Q

What are the characteristics of a free market economy?

A
  • private ownership of resources
  • Producers aim to maximise profits.
  • consumers aim to maximise satisfaction
  • resources are allocated by the price mechanism
38
Q

Who believed in the free market and what were the beliefs

A
  • Friedrich Hayek
  • provided the most efficient allocation of resources.
  • identified information gaps between what the economies actually required and what the
    central planners in command economies were saying it required
  • These gaps led to shortages or surpluses of goods/services in command economies.
  • He felt that the threat to efficiency and economic growth is government intervention
39
Q

Advantages of a free market economy

A
  • flexibility as the market system can respond quickly to changes in consumer wants.
  • Increased choice

-efficiency as competition and the profit motive help to promote an efficient allocation of resources.

40
Q

Disadvantages of a free market economy

A
  • Inequality with those who own resources and those who don’t
  • Monopolies= firm may become the sole supplier of a product and then exploit consumers by charging a higher price than the free market equilibrium.
  • Externalities= not taken into account when producing a good or services.
41
Q

Define a command economy

A

an economy in which all of the resources are owned by the state and the government controls the distribution of goods/service.

42
Q

What are the characteristics of a command economy

A
  • public ownership of resources
  • the state determines price
  • producers aim to meet production targets set by the state.
43
Q

Who believed in the command economy and what were the beliefs

A
  • Karl Marx
  • free markets lead to capitalism in which the owners of the factors of production (Capitalists) exploited the workers.

-share means of ownership and production

44
Q

Advantages of a command economy

A
  • greater equality as everyone can have a minimum standard of living
  • full employment
  • external benefits and costs will be taken into account when planning production
45
Q

Disadvantages of a command economy

A
  • inefficiency due to lack of competition and motives
  • shortages and surpluses if gov miscalculates supply and demand.
46
Q

Define a mixed economy

A

a blend of the free market and planned economy as individuals, firms and the government own factors of production and distribute goods/services.

47
Q

The role of the state in a mixed economy

A
  • defence and internal security
  • provision of public goods
  • health and education ( public services) and infrastructure.
  • redistribution from the rich to the poor. Welfare system.
48
Q

Who believed in the mixed economy and what were the beliefs?

A
  • Adam Smith
  • a role for governments to ensure efficiency in the allocation of resources and provide public and merit goods.
  • economies function best
    when private individuals
    work in their own self interest.

Microeconomics Theme 1 (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions