Unit 2 Flashcards
Define fixed and variable cost
A cost that does and doesn’t vary due to level of output
The returns for land,labour,capital,enterprise
Land - rent
Labour - wages
Capital - interest
Enterprise - profit
What’s productivity
Productivity is the level of output based on input
Draw a cost curve and an average cost curve
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What’s optimum output
Where the firms is most efficient(not profit wise)
Draw a circular flow diagram
Yesi
What is inflation and gdp
GDP is the value of output within an economy over a year
Inflation is a general rise in the level of prices within a year
Rate of inflation is the percentage rise
Measures of inflation
Cpi takes a measure of a basket of goods and weights it calculating the percentage of inflation
Rpi is the same but includes housing costs
Causes of inflation
Demand pull too much demand for a good causes excess demand which makes prices go up
Cost push costs of production go up so firms put up their product prices
Impacts of inflation on
Individuals
Firms
Individuals - reduces purchasing power if wages don’t keep up
It affects lower income earners as prices are more costly to them
Demands for firms product goes down so people are made unemployed
Firms
Costs of production rises so profits decrease
Workers demand pay rise so don’t lose purchasing power
Define unemployment
A person who is willing and able to work but can not find a job
Measures of unemployment
Claimant count - this is the number of people seeking job seekers allowance. It’s not always accurate as not everyone claims
Labour force survey - 150,000 are surveyed about their employment status quarterly. This is then scaled up and represents the country
Causes of unemployment
Technological - people are made unemployed due to an advance in technology
Seasonal - only need work at certain times of the year e.g. a sailing instructor not in winter
Regional - where people are made unemployed in a certain area e,g, Aberdeen for oil
What is economic growth and what’s it measured in
Economic growth is an increase in the level of output within an economy in a year
GDP is used to measure economic growth
Benefits of economic growth are?
Better standards of living
More government tax revenue
Government spend less on benefits
Disadvantages of economic growth
Demand pull inflation
Increased climate change e,g.pollution
Tax is collected for what reasons?
Pay for healthcare and education
Redistribute income
To provide welfare support for those on low incomes
3 types of government spending
Current expenditure - the money spent on day to day things such as the nhs or wages
Capital expenditure is spending in long term basis such as building a new school
Transfer payments are what one person earns and the government gives it to someone else
Define direct and indirect tax
Direct tax - a tax levied on income and wealth e.g, income tax
Indirect tax - a tax levied on expenditure e.g, vat
Reasons for tax
Redistribute income
Reduce demand for goods
To pay for public and merit goods
What’s the físicas policy
This is the use of taxation in order to affect aggregate demand in the economy
What the monetary policy
The use of interest rates or money supply in order to influence ggregate demand. Controlled by Bank of England
Name and define the three sectors of industry
Primary industry - his is industry employed in the extractions if raw material such as oil
Secondary industry this catergory of industry is involved with taking the raw material and manufacturing it into a
product e.g. whisky refining
Tertiary industry this is the selling of manufactured goods if providing a device e.g. retail or banking
