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ECO-1/2 > Unit 1-Area of Study 1-Market Systems > Flashcards

Unit 1-Area of Study 1-Market Systems Flashcards

0
Q

Define:

Economics

A

Economics is the study of how to use limited resources to help make individuals and society better of in order to improve living standards

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1
Q

Define:

Living Standards

A

Living standards refer to how well individuals live their daily lives in regard to material and non-material wellbeing

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2
Q

What are:

The two types of economics?

A
  • macroeconomics

- microeconomics

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3
Q

Define:

Microeconomics

A

Microeconomics regards decision making by individual firms, households and industries

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4
Q

Define:

Macroeconomics

A

Macroeconomics regards the workings of the economy as a whole, including the general influences on the levels of national spending, production and income

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5
Q

Define:

Needs

A

Goods and services that are required by individuals or society to survive

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6
Q

Define:

Wants

A

Goods and services that would make life more enjoyable but which are not essential for an individual or society

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7
Q

Why are needs and wants unlimited?

A
  • when one want is satisfied another appears
  • more material possessions one has, the more one wants
  • growing population
  • planned obsolescence
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8
Q

Define:

Resourcs

A

Resources is the input used in the production of goods and services

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9
Q

What are:

The two factors which limit productive capacity?

A
  • quantity of resources

- quality of resources

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10
Q

What is:

Higher efficiency?

A

When the same amount of input results in a higher output

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11
Q

What are:

The three types of resources?

A
  • land
    • natural resources
  • labour
  • capital
    • machinery, equipment, technology, money
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12
Q

Define:

Efficiency

A

Efficiency relates to the level of output per unit of input

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13
Q

What is:

GDP?

A
  • Gross Domestic Product
    • total value of goods and services produced
    • size of a country’s economy
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14
Q

Why are capital resources considered to be so important compared to and and labour?

A
  • without any capital, land and labour cannot be efficient in production
    • in poor countries such as Bolivia, there is not the infrastructure to capitalise upon rich natural resources
  • capital means the ability to produce goods and services is vastly increased
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15
Q

What is:

Relative Scarcity?

A

Refers to the fact that while all needs and wants are unlimited and there are only limited resources, some resources are scarcer than others, and therefore have a higher value, measured by price

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16
Q

What affects relative scarcity?

A
  • supply

- demand

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17
Q

What are examples of ways physical wellbeing can be measured?

A
  • infant mortality rate
  • life expectancy
  • obesity levels
  • malnutrition levels
  • quality of education system
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18
Q

Why do wealthy nations enjoy higher levels of wellbeing?

A

Rich nations can buy and invest to improve physical wellbeing

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19
Q

What is:

Price?

A
  • the money cost of a good or service

- measure of relative scarcity

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20
Q

What is the economic problem of relative scarcity?

A
  • limited resources cannot possibly fulfil the unlimited needs and wants of the population
    • supply is not equal to the demand
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21
Q

What makes items scarce?

A

Uneven supply and demand

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22
Q

What is:

Opportunity Cost?

A
  • the opportunity cost of any action is the value of the net best alternative forgone
    • the sacrifice
      • cross country comes at opportunity cost of 6ths footy
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23
Q

Define:

Productive Capacity

A
  • economy’s limit of goods and services output that can be produced when:
    • all resources are utilised
    • all resources are used efficiently
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24
Q

When moving from one point to another, what does the production possibility curve show?

A

Opportunity cost involved

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25
Q

What does a point inside the production possibility curve mean?

A
  • unemployed resources

- inefficient use of resources

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26
Q

What does a point outside the production possibility curve mean?

A
  • cannot be produced
  • excess demand
    • inflation or
    • reliance on imports
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27
Q

Where is the most efficient allocation of resources?

A

Where the combined value of both goods produced is at its max

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28
Q

How can productive capacity increase?

A
  • quantity of resources increases
  • quality of resources increases
  • efficiency increases
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29
Q

Define:

Economic Systems

A

Systems designed to wisely use scarce resources to improve living standards

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30
Q

What are:

Two features of economic systems?

A
  • system of decision making

- system of ownership

31
Q

What are the three questions that the system of decision making attempts to answer?

A
  • what and how much to produce?
    • opportunity cost
  • how to produce?
  • for whom to produce?
    • how is income from production shared
32
Q

What are the two extremes of:

System of decision making?

A
  • price or market system
    • consumer sovereignty
  • government system
    • government sovereignty
33
Q

What are the two extremes of:

System of ownership?

A
  • capitalist system
    • privately owned enterprises
  • socialist system
    • state owned enterprises
34
Q

How can economy move towards:

Price system?

A
  • free trade
  • removal of tariffs
  • tax reductions
35
Q

How can economy move towards:

Capitalism?

A
  • privatising major state assets

- Metro

36
Q

What are:

The four economic systems?

A
  • market capitalism
  • planned socialism
  • market socialism
  • planned capitalism
37
Q

What is:

Market Capitalism?

A
  • private ownership
  • price system
  • eg: Aus, USA
38
Q

What is:

Planned Socialism?

A
  • government ownership
  • government system
  • eg: Cuba, North Korea
39
Q

What is:

Market Socialism?

A
  • government ownership
  • price system
  • eg: China
40
Q

What is:

Planned Capitalism?

A
  • private ownership
  • government system
  • eg: Nazi
41
Q

Why is market capitalism said to be the most efficient system?

A

Profit incentive means private businesses will be producing the best goods and services they can, efficiently as they can because they are aiming for the largest profit they can. Governments have no choice but to do it, and are not driven for profit

42
Q

What is:

The Convergence Theory?

A
  • theory stating differences between economies will disappear over time
    • systems of decision making and ownership become the same
      • market capitalism considered most successful at the moment
43
Q

Australia’s economic system reflects which 2 values?

A
  • individual right and economic freedom

- government desired economic goals

44
Q

What is:

Consumer Sovereignty?

A

Based purely on price, individuals choose what to consume and therefore dictate to producers what to produce

46
Q

What are:

The 6 government desired economic goals?

A
  • strong and sustainable economic growth
  • full employment
  • price stability
  • external stability
  • equitable distribution of income and wealth
  • improvement in living standards
47
Q

What is:

Purchasing Power

A

Refers to the way consumers can dictate what is produced based on how and who produces it
-Eco friendly

48
Q

What are:

7 preconditions for pure-competitive market?

A
  • strong competition
  • ease of entry
  • no product differentiation
  • absence of government controls or restrictions
  • good knowledge of market
  • firms trying to maximise profits
  • consumers behave in economically rational way
49
Q

What are:

5 effects of high competition?

A
  • high efficiency
  • decreased prices = increased purchasing power
  • increased quality
  • increased output (collusion)
  • increased international competitiveness = increased exports
50
Q

What are:

5 effects of low competition?

A
  • low efficiency
  • increased prices = decreased purchasing power
  • decreased quality
  • decreased output (collusion)
  • decreased international competitiveness = decreased exports
51
Q

What are:

8 illegal anti-competitive tactics?

A
  • price fixing
  • price discrimination
  • exclusive dealing
  • collusive bidding
  • price leadership
  • predatory pricing
  • market zoning
  • interlocking directorships
52
Q

How does the following lower competition:

Price Fixing?

A

Firms set prices instead of consumers

-Dealers set whatever price they want

53
Q

How does the following lower competition:

Price Discrimination?

A

Charging different prices to different consumers

54
Q

How does the following lower competition:

Exclusive Dealing?

A

Refusing to supply to one or more firms

-Proposition Joe refusing to sell to Marlo

55
Q

How does the following lower competition:

Collusive Bidding?

A

Companies colluding to control the tender process

  • working together to avoid bidding and competing to win a contract
  • Proposition Joe’s meetings
56
Q

How does the following lower competition:

Price Leadership?

A

Dominant firm sets price and others follow

57
Q

How does the following lower competition:

Predatory Pricing?

A

Dominant firm cuts price to bankrupt others

-QANTAS

58
Q

How does the following lower competition:

Market Zoning?

A

Competing firms arrange to not compete in same market

-Barksdale staying East-side

59
Q

How does the following lower competition:

Interlocking Directorships?

A

Directors of boards of competing firms

-Eddy McGuire; Aths Vic and Collingwood

60
Q

Why is it important for competition to be high?

A
  • high competition = high efficiency
  • high competition = higher quality
  • high competition = lower price = accessible by more people = increased living standard
61
Q

Why does quantity demanded contract when price falls?

A
  • buyers cannot afford high price

- if price is too high, alternate items will be found

62
Q

Why is there a contraction in the level of supply when prices fall?

A
  • less profit to be made on G+S
  • harder to make profit
  • efficiency is more important
63
Q

What are:

10 factors affecting demand?

A
  • income tax rates
  • household income
  • fashion/tastes
  • advertising
  • population
  • interest rate on credit lent out
  • anticipated future prices
  • price of substitute items
  • price of complementary items
  • consumer/business confidence
64
Q

What are:

8 factors affecting supply?

A
  • production cost
  • wage cost per unit of output
  • business loan interest rate
  • tax rates
  • costs of inputs
  • technology cost and availability
  • climate
  • subsidies
65
Q

What are the 5 characteristics of:

Pure Competition?

A
  • many sellers
  • quality differentiation
  • high competition
  • price takers
  • ease of entry
66
Q

What are the 2 characteristics of:

Monopolistic Competition?

A
  • quite a few sellers

- brand name differentiation

67
Q

What are the 5 characteristics of:

Pure Monopoly?

A
  • one seller
  • no differentiation
  • low competition
  • price makers
  • no ease of entry
68
Q

What are the 2 characteristics of:

Oligopolistic Competition?

A
  • several sellers

- advertising differentiation

69
Q

What is an example of firms within the 4 types of market structures?

A
  • pure competition; Vic Market
  • monopolistic competition; Ralph Lauren
  • oligopoly; Coles
  • pure monopoly; Melbourne Wate
70
Q

What does a market failure result in?

A
  • resources under-utilised

- living standards lowered

71
Q

When does a market failure occur?

A

When the economic system fails to answer the key economic questions

72
Q

How does the government intervene in the event of a market failure?

A
  • government legislation
  • discouraging socially undesirable G+S
  • encouraging socially desirable G+S
  • promoting strong competition
73
Q

Where does the government intervention modify the market?

A
  • regulates level of economic activity
  • reallocates resources
  • redistributes income
74
Q

What are:

4 ways market activity can be regulated?

A
  • stimulus package
  • incentives
  • tax rates
  • government spending
75
Q

What are:

5 ways resources can be reallocated?

A
  • microeconomic policy
  • tariff removal
  • government production of services
  • taxes
  • subsidies
  • legislation
76
Q

What are:

5 ways income can be redistributed?

A
  • microeconomic policy
  • tariff removal
  • government production of services
  • taxes
  • subsidies
  • legislation

ECO-1/2 (8 decks)

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