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Economics A-level > Theme 1 > Flashcards

Theme 1 Flashcards

1
Q

What is utility?

A

The amount of satisfaction a person gets from consumption of a certain item (also known as total utility)

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2
Q

What is marginal utility?

A

The change in satisfaction from consuming 1 more unit

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3
Q

What factors shift the demand curve?

A

Income
Population changes
Changes in price of other goods
Changes in fashion

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4
Q

When demand increases which way does the demand curve shift?

A

Right

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5
Q

When demand decreases which way does the demand curve shift?

A

Left

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6
Q

Factors that shift the supply curve

A

Change in cost of production
Natural factors
Government taxes

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7
Q

When supply increases which way does the supply curve shift?

A

Right

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8
Q

When supply decreases which way does the supply curve shift?

A

Left

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9
Q

What is equilibrium (Market cleaning)?

A

Where the supply and demand curves meet. At this point all of the product supplied onto the market should be bought

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10
Q

What is derived demand?

A

Whend the demand for x comes from the demand for y

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11
Q

What is price elasticity of demand?

A

The responsiveness in demand to changes in price

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12
Q

What is the price elasticity of demand (Ped) equation?

A

Change in quantity demanded
Ped=. ——————————————-
%Change in price

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13
Q

What are elastic values in numbers?

A

Greater than 1

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14
Q

What are inelastic values numerically?

A

Between 0 and 1

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15
Q

What is 1 unitary elastic?

A

% Change in quantity demanded is the same as % change in price. (see graph)

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16
Q

What is 0 perfectly inelastic?

A

% Change in quantity demanded stays the same no matter the price (see graph)

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17
Q

What is infinite perfectly elastic?

A

% Change in quantity demanded drops off completely if there’s any change in price. (see graph)

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18
Q

What are the determinants of elasticity of demand?

A
  1. Time period, the longer the time under consideration the more elastic a product is likely to be
  2. Number and closeness of substitutes
  3. Proportion of income
  4. Is it luxury or necessity
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19
Q

What is income elasticity of demand (Yed)?

A

The responsiveness in demand to changes in income

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20
Q

What is a normal good?

A

Demand and income increase or decrease simultaneously

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21
Q

What is an inferior good?

A

Demand and income are indirectly proportional

22
Q

How is a normal good shown with notation?

A

It has a positive sign

23
Q

How is a luxury good denoted?

A

A value over 2 and a positive sign

24
Q

What is inferior good notation?

A

Has a negative sign

25
Q

What is income elasticity of demand (Yed) equation?

A

% Change in QD of good
Yed=. ————————————
% Change in income

26
Q

What is cross elasticity of demand (Xed) ?

A

The responsiveness of demand for a good to change in price of a related good

27
Q

What is the cross elasticity of demand (Xed) equation?

A

% Change in QD of good A
Xed=. ————————————-
% Change in price if good B

28
Q

What is ceteris paribus?

A

All other things being equal

29
Q

What is a normative statement?

A

A statement based on opinions and values

30
Q

What is a positive statement?

A

A statement which can be supported by evidence and fact

31
Q

What is a capital good?

A

Goods used to achieve a finished product eg machines, production equipment, vehicles for transport

32
Q

What is a consumer good?

A

Finished product

33
Q

What are the four factors of production? (CELL)

A

Capital
Enterprise
Land
Labour

34
Q

What is a PPF?

A

The maximum possible output combinations of two goods / services an economy can achieve when all resources are fully utilised (see graph)

35
Q

What is division/specialisation of labour?

A

Specialising workers into different tasks

36
Q

Advantages of the division of labour

A

-Workers become highly skilled at job
-Less mistakes are made
-Quicker/more efficient
-Higher productivity

37
Q

Division of labour disadvantages

A

-Job can become boring and repetitive to worker
-If a specialised worker leaves their job a less skilled worker replaces them
-Workers demand higher wages for better quality work
-Who can cover the worker if theyre ill

38
Q

What is country specialisation?

A

When counries specialise their resources into producing a limited range of goods and services

39
Q

What is absolute advantage?

A

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

40
Q

What is comparative advantage?

A

Being able to produce something at a lower opportunity cost than another country (ceteris paribus)

41
Q

Country specialisation advantages

A

Fully use resources
Increased output
Increased quality
Allows exports

42
Q

Country specialisation disadvantages

A

Risk of a worldwide recession
Risk of over-specialising (one industry)
Overuse natural resources

43
Q

What is opportunity cost?

A

What you up in order to acheive something else

44
Q

What is consumer surplus?

A

The difference between the total amount the consumer is willing to pay and what they actually pay

45
Q

What is producer surplus?

A

The difference between the amount a producer is willing to supply and the actual amount they recieve

46
Q

Explain scarcity

A

Unlimited wants and limited resources

47
Q

What is flat tax?

A

Imposed on firms, but can be passed on through higher prices

48
Q

What is ad valorem tax?

A

Unit tax (percentage tax) VAT is an example of this

49
Q

What is a subsidy?

A

Money given by the state to businesses

50
Q

What is market failure?

A

When the free market fails to allocate scarce resources effectively

51
Q

What are the determinants of elasticity pf supply?

A
  1. Availability of the 4 factors of production (CELL)
  2. Time
  3. Spare capacity
  4. Spare stock and components

Economics A-level (2 decks)

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