Brainscape's Knowledge GenomeTM

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


See full index

A-level Economics > Theme 1 > Flashcards

Theme 1 Flashcards

1
Q

What assumption do economists make?

A

Cetris Paribus

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

What is a positive statement?

A

A statement with an objective and can be tested with factual evidence

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

What is a normative statement?

A

A statement based on a valued judgement (based on opinion)

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

What is the economic problem?

A

Wants are unlimited and resources are limited

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

What is opportunity cost?

A

The value of the next best alternative

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

What are the 4 factors of production?

A

Capital, Entrepreneurship, Land, Labour

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

What is a PPF?

A

The maximum productive potential of an economy

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

The original PPF is drawn assuming…

A

There is a fixed amount of resources and a constant state of technology

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

What are capital goods?

A

Goods that can be used to produce other goods

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

What is specialisation?

A

When a worker completes a specific task in a production process

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

Advantages of specialisation?

A
  • Higher output and potentially higher quality
  • More opportunities for economies of scale
  • More competition, an incentive to keep AC’s low
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Disadvantages of specialisation?

A
  • Work is very repetitive so less motivated workers
  • More structural unemployment since skills aren’t transferable
  • Higher worker turnover, dissatisfied workers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a comparative advantage?

A

When you can produce a good at a lower opportunity cost

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

What is an absolute advantage?

A

When you can produce more with the same number of inputs

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

What are the functions of money?

A
  • Act as a medium for exchange
  • A measure of value
  • A store of value
  • A method of deferred payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a free market economy?

A

Where governments leave markets alone and let supply and demand allocate scarce resources

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

Advantages of a free market?

A
  • Firms are likely to try and be efficient
  • Avoids the bureaucracy of government
  • Can lead to more personal freedom
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Disadvantages of a free market?

A
  • Free market ignores inequality
  • Monopolies can form increasing prices
  • Overconsumption of demerit goods
  • Public goods can’t be provided
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a command economy?

A

Where the government allocates all of the scarce resources

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

Advantages of a command economy?

A
  • Easier to coordinate resources in a crisis
  • Government can compensate for market failure
  • Reduce the inequality in society
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Disadvantages of a command economy?

A
  • Governments fail just as well as markets
  • May not meet consumer preference
  • Limits democracy and personal freedom
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a mixed economy?

A

Has features of a free market and a command economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

When making economic decisions…

A

Consumers will aim to maximise utility and firms will aim to maximise profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is demand?

A

The quantity of a good or service that will be purchased at a certain price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Factors that effect demand?

A

Population, Income, Advertising, Substitutes, Expectations

26
Q

what are the types of demand?

A
  • Derived demand
  • Composite demand
  • Joint demand
27
Q

What is the law of diminishing marginal utility?

A

That as each extra unit of a good is consumed the utility received decreases

28
Q

What is price elasticity of demand?

A

The responsiveness of the change in demand to changes in price

29
Q

Factors that effect PED?

A
  • The necessity of the good
  • How many substitutes the good has
  • The proportion of income spent on that good
  • How addictive it is
30
Q

What is income elasticity of demand?

A

The responsiveness of the change in demand to changes in income

31
Q

What is an inferior good?

A

Where demand increases as income falls YED<0

32
Q

What is a normal good?

A

Where demand increases as income increases YED>0

33
Q

What is a Luxury good?

A

Where an increase in income causes and even bigger increase in demand YED>1

34
Q

What is cross elasticity of demand?

A

The responsiveness of a change in demand for X to a change in price of Y

35
Q

What goods have a negative XED?

A

Complimentary goods

36
Q

What goods have a positive XED?

A

Substitute goods

37
Q

What does it mean if XED=0?

A

They’re unrelated goods

38
Q

What is supply?

A

The quantity of a good or service that producer is able and willing to supply at a given price

39
Q

Why do supply curves slope upwards?

A
  • If price increases its more profitable to produce more
  • High prices encourage new firms to enter the market
  • Larger outputs increase costs so higher price needed
40
Q

Factors that effect supply?

A

Productivity, Indirect taxes, Number of firms, Technology, Subsidies, Costs of production

41
Q

What is price elasticity of supply?

A

The responsiveness of a changes in supply to changes in price

42
Q

Factors that effect PES?

A
  • Time scale
  • Spare capacity available
  • Levels of stocks
  • How substitutable factors of production
  • The barriers to entry
43
Q

What is price determination?

A

Its where supply meets demand, Market equilibrium

44
Q

What are the functions of the price mechanism?

A

Rationing, Incentive, Signalling

45
Q

What is consumer surplus?

A

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

46
Q

What is producer surplus?

A

the difference between the price the producer is willing to charge and what they actually charge

47
Q

What are indirect taxes?

A

Taxes imposed on goods and services by the government

48
Q

What types of indirect taxes are there?

A

Ad valorem, Specific tax

49
Q

What is a subsidy?

A

Its a payment from the government to a producer to lower costs and encourage production

50
Q

What are the effects of subsidies?

A
  • Increase output and lower prices
  • Can boost employment
  • Can help to reduce inflation
  • Government failure and large opportunity cost
51
Q

Why don’t consumers always act rationally?

A
  • Influenced by other people
  • Habitual behaviour
  • Consumer weakness at computation
52
Q

What are the types of market failure?

A

Externalities, Under-provision of public goods, Information gaps

53
Q

What is an externality?

A

A cost or benefit to a third party received from an economic transaction outside the market mechanism

54
Q

Government polices for externalities?

A

Indirect taxes, Subsidies, Regulation, Provide information

55
Q

What is a public good?

A

They are non-rival, non excludable

56
Q

What are Quasi public goods?

A

Goods that have characteristics of both public and private goods

57
Q

What is symmetric information?

A

Where both the consumer and the producer have perfect knowledge

58
Q

What is asymmetric information?

A

Where both the consumer and the producer have unequal knowledge

59
Q

How can governments intervene in markets?

A
  • Indirect taxes
  • Subsidies
  • Maximum price
  • Minimum price
  • Trade-able pollution permits
60
Q

Advantages of trade-able pollution permits?

A
  • Benefits the environment
  • Could raise revenue for the government
  • Raise revenue for green firms who sell off unused permits
61
Q

Disadvantages of trade-able pollution permits?

A
  • Firms may relocate elsewhere without permits
  • May pass higher costs on to consumers
  • Barrier to enter the market reducing competition
  • Expensive to monitor
62
Q

Causes of government failure?

A
  • Distortion of price signals
  • Unintended consequences
  • Excessive administration costs
  • information gaps

A-level Economics (6 decks)

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