Unit 2

Question 1

Define fixed and variable cost

Answer 1

A cost that does and doesn’t vary due to level of output

Question 2

The returns for land,labour,capital,enterprise

Answer 2

Land - rent
Labour - wages
Capital - interest
Enterprise - profit

Question 3

What’s productivity

Answer 3

Productivity is the level of output based on input

Question 4

Draw a cost curve and an average cost curve

Answer 4

.

Question 5

What’s optimum output

Answer 5

Where the firms is most efficient(not profit wise)

Question 6

Draw a circular flow diagram

Answer 6

Yesi

Question 7

What is inflation and gdp

Answer 7

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

Question 8

Measures of inflation

Answer 8

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

Question 9

Causes of inflation

Answer 9

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

Question 10

Impacts of inflation on
Individuals
Firms

Answer 10

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

Question 11

Define unemployment

Answer 11

A person who is willing and able to work but can not find a job

Question 12

Measures of unemployment

Answer 12

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

Question 13

Causes of unemployment

Answer 13

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

Question 14

What is economic growth and what’s it measured in

Answer 14

Economic growth is an increase in the level of output within an economy in a year
GDP is used to measure economic growth

Question 15

Benefits of economic growth are?

Answer 15

Better standards of living
More government tax revenue
Government spend less on benefits

Question 16

Disadvantages of economic growth

Answer 16

Demand pull inflation

Increased climate change e,g.pollution

Question 17

Tax is collected for what reasons?

Answer 17

Pay for healthcare and education
Redistribute income
To provide welfare support for those on low incomes

Question 18

3 types of government spending

Answer 18

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

Question 19

Define direct and indirect tax

Answer 19

Direct tax - a tax levied on income and wealth e.g, income tax
Indirect tax - a tax levied on expenditure e.g, vat

Question 20

Reasons for tax

Answer 20

Redistribute income
Reduce demand for goods
To pay for public and merit goods

Question 21

What’s the físicas policy

Answer 21

This is the use of taxation in order to affect aggregate demand in the economy

Question 22

What the monetary policy

Answer 22

The use of interest rates or money supply in order to influence ggregate demand. Controlled by Bank of England

Question 23

Name and define the three sectors of industry

Answer 23

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