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Economics 9708 > Unit 1-Basic economic ideas and resource allocation > Flashcards

Unit 1-Basic economic ideas and resource allocation Flashcards

1
Q

What is economics?

A

A social science subject that studies how human beings manage the basic economic problem and resource allocation in the most efficient way

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2
Q

Why is economics a social science?

A

social - focuses on human behaviour
science - theories are put forward and invesitigated

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3
Q

What are theories/models?

A

A simplified representation of what has taken place and usually explained mathematically.
They can be used over and over in different contexts, to test theories.

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4
Q

Define

Positive statements

+words used

A

statements that can be settled with facts
they key words are true/false, yes/no
true is taken as to be consistent with facts

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5
Q

Define

Normative students

+key words

A
  • statements based on opinion, moral beliefs
  • can not be proved by facts, settled by voting
  • ought would should
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6
Q

What is the fundamental economic problem?

A

unlimited needs and wants and limitied resources
to satisy the needs and wants

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7
Q

What are the factors of production?

A

Land
Captial
Labour
Enterprise

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8
Q

Define

Oppurtunity Cost

A

The cost of the forgone alternative

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9
Q

What are the economic problem questions?

A

What to produce
How to produce
For whom to produce

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10
Q

Define

Scale of the preference

A

How human beings arrange their wants to minimise oppurtunity cost

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11
Q

Define

Ceteris Paribus

A

used by economists to refer to a situation where other things are held constant or other things remain equal

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12
Q

The margin

A
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13
Q

Time periods

Short Run

A

some factors of production are changed, not all of them

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14
Q

Time periods

Long run

A

all factors of production can change

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15
Q

Time periods

very long run

A

all factors of production can change as well as other external variables

eg. technology\

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16
Q

Factors of production

Land

A

natural resource
valued on both quality and quantity and can be improved

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17
Q

Factors of production

What is the factor reward for land?

A

Rent

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18
Q

Factors of production

Labour

A

human resource
Quality - skilled or unskilled depending on levels of eductation
Quantity - affected by working population, cultural practices, immigration

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19
Q

Factors of production

What is the factor reward for labour?

A

salaries/wages

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20
Q

Factors of production

Capital

A

Physical resource that is human made and that aids production
Combines land and labour to produce goods and services

eg offices machines and infrastructure

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21
Q

Factors of production

What is the factor reward for capital?

A

Interest

22
Q

Factors of production

Enterprise

A

Form of human capital involves organising production and taking risks to be able to produce the goods and services themselves

23
Q

Factors of production

Factor reward for enterprise

A

Profit

24
Q

First mover advantage

A

an advantage gained by a company/enterprise that first intoduces a good or service to the market

25
Q

Benefit of economies of scale?

A

the more goods produced, the cheaper it is to produce and the lower the cost per unit for consumers

26
Q

Define

Non-excludable

A

Once provided you can not stop another from using it

27
Q

Define

Non-rival

A

one’s consumption does not diminish anothers

28
Q

Define

Non-rejectable

A

Once provided you can not refuse

29
Q

Forms of labour?

A

Capital saving and Labour saving

30
Q

Advantages of division of labour

A
  • Efficieny at specific operations
  • Saving equipment
  • Saving time
  • Saving skills(new jobs)
  • Allows for greater degrees of mechanisation
31
Q

Disadvantages of division of labour

A
  • Loss of flexibility
  • Loss of other skills
  • Monotony
  • Interdependence
  • Increased risk of unemployment
32
Q

What is required for specialisation to work properly

A

Large markets for standardised products, large output and large labour force and good transport systems

33
Q

What is direct production?

A

one person makes a product beginning to end

34
Q

What is Indirect production?

A

multiple people perform specific tasks to produce one good

35
Q

Market systems

A

allocative mechanism in charge of resource managemnet to resove the fundamental economic problem

36
Q

Describe

Planned system

A
  • Government is in charge of resource allocation
  • This is done by the central planning committee
  • Long bureaucratic chain of command
37
Q

Market systems

Role of the central planning committee in the planned market system?

A
  • Allocation of resources
  • Setting targets for the economy
  • Planning for long term growth
38
Q

Market systems

Advantages of a Planned economy

A
  • Public goods are produced
  • No wasteful duplication and competition
  • economies of scale
  • Decisions not influenced by the price mechanisms
39
Q

Market Systems

Disadvantages of a Planned economy

A
  • Bureaucracy
  • Limited choices for consumers
  • No customer sovereinity
  • Low motivation of workers- low quality output
  • Shortages and rationing due to mistakes of the cpc
40
Q

Describe

Market economy

A

Controlled by private capitalists and the price mechanism

41
Q

Market systems

Advantages of Market economies

A
  • Customer sovereinity
  • More options for the consumers
  • better quality of goods due to competition
  • High motivation of workers
42
Q

Market systems

Disadvantages of Market systems

A
  • Wasteful duplication
  • Demerit goods
  • Unstable economy
  • Public goods are not produced
43
Q

Define

Free Goods

A

abundant in supply with no opputunity cost
non-excludable and non-rival

can be turned into economic goods

44
Q

Define

Private/economic goods

A

scarce and have an oppurtunity cost
Excludable and Rivalrous

45
Q

Define

Zero-marginal cost

A

No direct cost to you, but bought by the government with your taxes

46
Q

Define

Public goods

A

Produced by the government because market would underproduce them
non-excludable
non-rival
non-rejectable
zero-marginal cost

47
Q

Define

Merit goods

A

Produced and subsidised by the government to encourage consumption because they have positive externalities, and would be underproduced by the market

48
Q

Define

Demerit goods

A

Goods with negative externalities that are often over consumed dues to lack of education on their effects.
Heavily taxed by the government to discourage use and consumption

49
Q

Production Possibility Curve

A

A representation showing the maximum quantity of two goods that can be produced given the current resources and state of technology, assuming all resources are fully and efficiently utilized

50
Q

What does point B represent on the PPC

L
A

Full utilization of resources for good A

Economics 9708 (2 decks)

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