Theme 1: basic key terms Flashcards
four factors of production?
examples?
- land - diamonds
- labour - immigration
- capital - farm machinery
- enterprise - universities
sectors of the economy
- primary - raw material production
- secondary - manufacturing
- tertiary - services
What’s division of labour?
Benefit?
Problem?
assigning different parts of the production process to different people
- improves efficiency
- only trained for one job
International division of labour.
- examples?
- different countries specialise in certain products
- france- wine and cheese
International specialism
- 2 benefits
- able to produce more goods and can do so at a cheaper amount
- able to produce a good at lower opportunity cost
specialisation
- worker trained in a specified area of work
PPF - production possibility frontier
- maximise output by using all factors of production available
- if inside the ppf?
- outside?
- if you move along the line?
inside - underusing resources, recession
outside - unsustainable
move - opportunity cost
a shift in the PPF line can be caused by…?
- four factors of production?
- discovery of natural resources (e.g.oil)
- population of workers, need young able labourers
- better equipment/machinery
- education
pivotal shift in PPF is caused when…
one factor changes and the other remains the same
positive statement
- can be backed up
- based on evidence
normative statements
- subjective statements
- they’re value judgements
- based on opinion
functions of money
- buy goods
- invest
- value
- exchange
- payment/ settling debts
what might cause people to demand british goods?
- quality
- price
- exchange rates
- reputation
- brand name
- 3 types of market
- examples of products in each market
- Free Market - house/ car/ food
- Mixed Economy - alcohol/ cigarettes
- Black market - drugs/ narcotics
price mechanism functions
- allocates resources effectively
- clears any surplus
- sends signals to suppliers to supply more/less
command economy
- examples?
- when the government allocate all resources
- Korea, Cuba, Venezuela
command economy benefits
- can prevent mass unemployment
- can adjust production of goods according to demand
- prices easily managed
- low levels of inequality
command economy drawbacks
- decisions can be made by people who have little experience of what is actually occurring
- unable to respond to consumer preferences
what are subsidies ?
a payment made to suppliers by the government to encourage production
where are the government likely to give subsidies?
- university
- agriculture (necessities)
- sustainable projects that help economy
- direct tax
- indirect tax
- tax on income or profits
- tax on purchases (ad velorem, flat tax)
- Ad Valorem tax
- Flat tax
- percentage of price
- certain amount per product
why does taxing cigarettes fail to stop people smoking?
- inelastic product
- people are addicted
- people buy them anyway
externality
an affect on a third party as a result of a market transaction
alcohol/pub market externality
- people get aggressive
- NHS pressure
- hungover, less productive at work
- police time
- drink driving
