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Economics > Unit 1 The Market System > Flashcards

Unit 1 The Market System Flashcards

(79 cards)

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1
Q

What is the basic economic problem?

A

What To Produce

How to produce

For whom to produce

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2
Q

What is scarcity

A

high demand low supply

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3
Q

what is production possibility curve (PPC)

A

economic model used to illustrate what to produce

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4
Q

define microeconomics

A

microeconomics study of small economic systems that are part of national or international systems

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5
Q

define effective demand

A

Willingness and ability of consumers purchasing an item at a given price

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6
Q

What is the law of demand

A

Price and quantity demanded are inversely proportional

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7
Q

what is the elasticity of a good with an elasticity between 0-1

A

inelastic

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8
Q

what is the elasticity of a good with an elasticity of infinity

A

perfectly elastic

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9
Q

define ‘elastic’

A

change in demand / supply more proportionate to the change in price / income

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10
Q

4 factors which influences the elasticity of supply

A

availability of factors of production

availability of stocks

space capacity

time

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11
Q

what is the elasticity of a good with an elasticity of 0

A

perfectly inelastic

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12
Q

what is the elasticity of a good with an elasticity of 1

A

unitary elastic

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13
Q

what does an outward shift in the PPC indicate

A

positive economic growth

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14
Q

formula for PED

A

percentage change in quantity demanded / percentage change in price

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15
Q

define ‘wholesalers’

A

person or company that sells goods in large quantities to businesses, rather than to the general public

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16
Q

8 factors which may shift the demand curve

A

consumer incomes

taxes on incomes

price of substitutes

price of complements

change in tastes and fashion

advertising

population changes

other factors (such as weather, pandemic, etc)

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17
Q

what is the law of supply?

A

price and quantity supplied have a proportionate relationship

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18
Q

define ‘complement’

A

two things which go together (eg- car and petrol)

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19
Q

define equilibrium price (also known as market clearing price)

A

the price where supply and demand is the same

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20
Q

1 advantage of subsidies

A

moderation of supply and demand

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21
Q

define fast moving consumer goods (FMCG)

A

goods, especially food, that sell very quickly and in large amounts

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22
Q

what causes movement in the demand curve

A

change in price

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23
Q

what happens to the demand curve with a change in price?

A

expands if the price decreases, contracts if the price increases

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24
Q

1 disadvantage of subsidies

A

potential increase in taxes

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25
what is the elasticity of a good with an elasticity between 1 and infinity
elastic
26
define ‘unitary elastic’
change in demand / supply proportionate to the change in price / income
27
what are The four factors of production
Land Labour Capital Enterprise
28
define Opportunity cost
cost of the next best alternative given up (when making a choice)
29
what is positive economic growth
increase in the output of goods and services by a nation
30
what is a shift in the demand curve
change in quantity demanded at the same price
31
define the term ‘supply’
amount that producers are willing to offer for sale at different prices at a given period of time
32
define price elasticity of supply
the responsiveness of the quantity supplied to a change in price
33
define ‘perfectly inelastic’
change in quantity completely unresponsive to change in price/ income
34
define ‘inelastic’
change in demand / supply less proportionate to the change in price / income
35
define ‘perfectly elastic’
increase in price gets the demand to zero
36
define price elasticity of demand
the responsiveness of the quantity demanded to a change in price
37
5 factors which which may decrease supply
costs of production increase technology becomes outdated sellers expect bad things in the future sellers leave the market opportunities in different markets are good
38
4 factors of positive economic growth
New Technology Improved efficiency Improved Education and training New resources
39
5 reasons why consumers can be irrational
Limited ability to calculate emotion overtakes logic importance of social networks desire for instant rewards people stick to default choices
40
what happens when the price of a product is not at its equilibrium?
there is either an excess supply or excess demand
41
define negative economic growth
increase in the level output by a nation
42
4 factors which affect PED
availability of substitutes degree of necessity proportion of income spent on a product time period
43
what are subsidies?
fund given by government or any other authority in order to help an industry or business, or to pay for a public service
44
5 factors which shift the supply curve
cost of production indirect taxes subsidies changes in technology natural factors
45
define GDP (gross domestic product)
market value of all final goods and services produced in a period (usually yearly), an internationally recognised measure of national income
46
how does time period effect the elasticity of supply
the shorter time period, the more difficult firms find it to switch from making one product to another
47
how does existence of spare capacity effect the elasticity of supply
the more capacity there is in the industry, the easier it should be to increase output if price goes up, this makes supply more elastic
48
how does ease of storing stocks effect the elasticity of supply
if it is easy to store goods, then if price rises the firm can sell these stocks and supply is more elastic
49
how does length of production period effect the elasticity of supply
the quicker a good is to produce, the easier it will be to respond to a change in price
50
what is the income elasticity of a normal good
0-1
51
what is the income elasticity of a luxary good
>1
52
what is the income elasticity of an inferior good
decimal value or less than -1
53
what is the formula for income elasticity of demand
change in quantity demanded / change in income
54
what is the relationship of inferior goods and change in income
inversely proportionate
55
what is a negative/ de-merit good, provide examples
goods with negative impact which tend to be inelastic examples include alcohol, tobacco and illegal drugs
56
what leads to market failure
resources not being used effectively —> basic economic problem —> market failure
57
what are 5 causes of market failure
externalities missing markets lack of competition factor immobility lack of information
58
what are externalities?
cost or benefit incurred by external stakeholders based on the actions of a business
59
what are the two types of goods?
public goods merit goods
60
what is a merit good
goods that are under-provided by the private sector
61
what is a public good
goods that are not likely to be provided by the private sector
62
what are the two characteristics of public goods
non rivalry non excludability
63
what is non excludability in a public good
a good from which any consumer cannot be excluded from its consumption (eg- police service)
64
what is non rivalry in a public good
consumption of a public good by one individual cannot reduce the amount available to others (eg police)
65
define ‘economy’
system that attempts to solve the basic economic problem
66
define private sector
provision of goods and services by businesses owned by an individual or group of individuals
67
what are the aims 4 of a business in the private sector
survival, growth, profit, social responsibility
68
what are the 3 places ownership in the private sector derived from
sole trader, partnership, companies
69
define public sector
government organizations that provide goods and services for the economy
70
what are the 4 aims of the public sector
minimizing cost, social cost and benefit, profit in few nations, improving quality of services
71
what are the 4 places ownership in the public sector is derived from
central government departments local authority SOE or PC other public sector organizations
72
what is the aim of an economic system
solve the basic economic problem
73
what are the 3 types of economy
Market / free enterprise economy (mostly private) command / planned economy (mostly public) mixed economy
74
define external costs (externalities)
negative spillover effects of consumption or production – they affect third parties in a negative way
75
define external benefits
positive spillover effects of consumption or production – they bring benefits to third parties
76
define private costs
costs of an economic activity to individuals and firms
77
define private benefits (externalities)
rewards to third parties of an economic activity, such as consumption or production
78
define social benefits
benefits of an economic activity to society as well as to the individual or firm
79
define social costs
costs of an economic activity to society as well as the individual or firm

Economics (2 decks)

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