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economics yr 11 > topic 1 > Flashcards

topic 1 Flashcards

1
Q

Definition: Price

A

monetary indicator of relative value for both consumers and producers

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2
Q

Definition: Economic Growth

A

refers to the increase in the output (GDP) of an economy over a period of time. it is a key economic indicator!
this is also shown by an outward shift of the PPF

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3
Q

Real GDP Formula ($)

A

Nominal GDP
x
100/100+INFLATION

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4
Q

Definition: technical efficiency

A

achieving the maximum improvement in output from resource inputs

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5
Q

Definition: Human Capital

A

level of skills, education, training, experience, productivity and health of an individual in the workforce (low human capital = structurally unemployed)

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6
Q

Definition: Complementary Wants vs Substitute Wants

A

two products that are generally consumed together vs products that are consumed as alternatives of each other

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7
Q

3 contributors to the economy/marketplace

A

households
businesses
governments

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8
Q

What are the key differences between a free and planned market economy?

A
  1. government intervention
  2. ownership of resources
  3. inequality rates
  4. standards of living
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9
Q

Definition: Consumer Sovereignty

A

consumer spending and demand (and available resources) determines the pattern of business production

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10
Q

Definition: Mixed Economy Market

A

an economic system that uses more than one aspect of both planned and market economies
- has a free market for consumers and firms
- government only steps in when necessary to protect consumer rights, etc.

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11
Q

Definition: Individual Wants vs Collective

A

is specific to a person’s taste (provided by a private business) vs G&S that are wanted by a community of people (provided by government)

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12
Q

Definition: allocative efficiency

A

allocating resources efficiently (how well you do something) to best satisfying the needs of society. this is achieved by minimising the Opportunity Cost.

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13
Q

Definition: aggregate demand

A

the total demand for goods and services within the economy

C+I+G+(X-M)

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14
Q

Definition: real GDP

A

monetary value of the G&S (output) produced in a country over a period of time after adjusting for inflation

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15
Q

Definition: GDP / nominal GDP

A

monetary value of the G&S (output) produced in a country over a period of time

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16
Q

What are the economic indicators?

A
  1. employment (95%) (rest are structurally unemployed)
  2. inflation (2-3%)
  3. economic growth (3-4%)
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17
Q

Definition: Marginal rate of Substitution

A

sacrifice of good A
/
to gain 1 unit of good B

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18
Q

MPC/MPS formula

A

change in C or S
/
change in Y (income)
MPC + MPS = 1

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19
Q

Definition: Basic Need vs Luxury Wants

A

a good or service needed for survival*, vs non-essential G&S

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20
Q

Definition: Planned/Command Economy

A

economic system where the government (public sector) makes all the economic decisions about the big 4
- big 4 are controlled by specialised divisions within the government
- offers more security
- communistic (business cycle controlled bu government/public)
- reduces inequality
- lower standard of living (shortages, corruption, etc.)

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21
Q

What are the 3 types of industry catergories?

A
  1. primary industries (extraction of raw materials = 5%)
  2. secondary industries (conversion of raw materials into goods, final or capital = 10%)
  3. tertiary industries (provision of services = 85%)
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22
Q

leakages > injections

A

economy contracts

23
Q

Definition: Economics

A

Economics is about the study of human behaviour in the Distribution and Exchange and Production of goods & services in an economic system. (DEP)

24
Q

What are the 4 types of income?

A
  1. wages (provided by labour = 56%)
  2. rent, profits and interest/dividends (from providing FOP = 28%)
  3. welfare payments ( =11%)
  4. insurance claims/other ( = 5%)
25
Q

Investing in Capital Goods (y axis on curved graph) ______

A

helps increase future GDP (CAPmax)

26
Q

leakages < injections

A

economy expands

27
Q

Definition: Marginal Propensity to Consume/Save

A

change in one unit of income that leads to a change in ‘x’ units of consumption/savings

28
Q

Investing in Consumer goods (x axis on
curved graph)

A

helps increase current GDP (CONmax)

29
Q

2 sector, 3 sector, 4 sector and 5 sector model equilibrium’s

A

2: Y=O=E
3: Y=O=E / leakages = injections (S=I)
4: Y=C+I+G / leakages = injections
5: S+T+M=I+G+X / leakages = injections

30
Q

Definition: Nominal Interest

A

the rate you see when you apply for a credit card or loan. the lenders real profit desired + inflation

31
Q

Definition: Market Economy

A

economic system where individual producers (private sector) own and determine the big 4 of G&S production
- allocation = price mechanism
- production = consumer sovereignty
- economic decisions = free enterprise (market competition)
- capitalistic (business cycle controlled by private)
- government has no say
- lots of inequality
- insecure
- higher standard of living

32
Q

Factor Income for FOP

A

Capital = interest
Enterprise = profit
Land = rent
Labour = wages/salaries

33
Q

Definition: dynamic efficiency

A

the economies ability to adopt to changing needs and wants

34
Q

Definition: Recurring Wants

A

wants that need to be repeatedly satisfied over a period of time

35
Q

Definition: Opportunity Cost

A

the cost of the next best alternative forgone by present consumption expressed in money, items or time (graphically shown through the PPF)

36
Q

Definition: Real interest rate

A

expresses the cost of borrowed funds after the expected erosion of the value of those funds due to the rise in the general price level
Real Interest = Nominal Interest - Inflation

37
Q

what are the key factors of the Business Cycle?

A

Expenditure
Investment
Employment
Inflation (always a step behind)
Output

38
Q

Definition: Production Possibility Frontier

A

is a graph representing the maximum employment of resources (slope of PPF = opportunity cost)
ASSUMPTIONS:
- between 2 options (x and y axis)
- in the short run
- all resources are used efficiently

39
Q

What is the Economic Problem?

A

the problem of trying to allocate scarce resources to satisfy societies unlimited needs and wants

40
Q

Economic Growth Formula (%)

A

current real GDP - prior real GDP
/
prior real GDP

41
Q

Definition: Productivity

A

output per unit of usually labour per unit of time

42
Q

2 sector, 3 sector, 4 sector and 5 sector model sectors

A

2: households and firms
3: households, firms and financial (banks)
4: households, firms, financial and government
5: households, firms, financial, government and overseas

43
Q

4 main questions: Whom to and how to distribute

A

decided using the price mechanisms and incomes

44
Q

Definition: Disposable Income

A

= Gross Income - Taxation

45
Q

Where does Economic Growth come from?

A
  1. additional resources discovered
  2. resources increase productivity
  3. technology improves
46
Q

Factors of Production

A

Capital (producer goods used to make more G&S)
Enterprise (effort of managers to take risks while managing the FOP)
Land (natural resources used in the production process)
Labour (human put into the production

47
Q

What causes an increase in GDP?

A

increase in:
1. population
2. participation
2. productivity (how much you produce of smth)

48
Q

Definition: Business Cycle

A

a series of fluctuations termed as troughs and peaks of a countries real GDP over a period of time

49
Q

4 main questions: what and how much to produce?

A

decide between consumer or capital goods
consumer demand decides this factor of production as they have consumer sovereignty

50
Q

Definition: Gross Income

A

total of household income from the factor incomes before deduction of taxation

51
Q

Definition: specialisation

A

runs the economy because people rely on others who are more skilled in other goods and services opposite of self sufficiency

52
Q

Total revenue formula

A

= price x quantity sold

53
Q

What is the governments role?

A

to prevent dis-market failure by
- allocating resources
- stabilising the business cycle
- redistributing income
- market regulation

economics yr 11 (7 decks)

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