unit 3 chapter 1 economics

Question 1

what is opportunity cost

Answer 1

the values (monetary or non monetrary) that is being sacrificed or would have been enjoyed if the next best alternative is selected

Question 2

difference between tradeoffs and opp. cost

Answer 2

tradeoffs simply state the next best alternative, where opportunity cost is what is being sacrificed

Question 3

what is microeconomics

Answer 3

study of economic behaviors of individual consumers as well as business (a particular economy rather then the whole thing)

Question 4

what is macroeconomics

Answer 4

builds on microeconomics and attempts to explain economy wide phenomenas

Question 5

what are then 10 principles of economics mankius

Answer 5

1. people face tradeoffs
2. cost is what you give up to get it
3. rational people think at the margin
4. people respond to incentives
5. trade can make everyone better off
6. markets are usually a good way to organise economic activity
7. government can sometimes improve market outcomes
8. a country’s standard of living depends on its ability to produce goods and services
9. prices rise when governments print too much money
10. society faces short term tradeoff between inflation and unemployment

Question 6

what are the 3 assumptions economists make

Answer 6

1. ceteris paribus
2. rational economic decision making
3. consumers utility maximisers, firms profit maximisers
4. diminishing marginal utility

Question 7

what is cetris paribus

Answer 7

it means when you isolate the effect of one variable assuming the other factors dont change
- prevents confusion
eg. if the price of an apple increases, ceteris paribus, the quantity demanded of apples decreases

Question 8

what entails rational economic decision making

Answer 8

• agent has weighed up costs and benefits
• agent has perfect information
• agent is devoid of information

Question 9

what do you mean by diminishing marginal utility

Answer 9

although assumed to benefit from greater consumption, general assumed that each additional unit of a good or service does not generate same degree of satisfaction

Question 10

what is relative scarcity

Answer 10

unlimited needs and wants and not enough resources

Question 11

needs vs wants

Answer 11

a need is a good or service deemed necessary for survival (housing, food, clothes)

a want however is a good or service that is not necessary for survival but consumption adds to quality of life

Question 12

what are the three economic resources

Answer 12

1. land or natural
2. labour resources
3. capital resources

Question 13

what are the three economic questions

Answer 13

what goods and services will be produced and in what quantities?

how will the goods and services be produced?

for whom will these goods and services be produced for?

Question 14

what are the different systems used to allocate resources?

Answer 14

1. market capitalism
2. planned socialism
3. planned capitalism
4. market socialism

Question 15

what is market capitalism

Answer 15

private actors own and control property according to their interest with minimal government intervention and prices give signals

Question 16

what is planned socialism

Answer 16

where the entire nations economy develops in a planned and proportionate way and the government is primarily responsible for allocation. productive assets are state owned so no excessive benefits

Question 17

what is planned capitalism

Answer 17

system where its controlled by government who make all the decisions about what happens with the money thats made, but ownership remains with individuals, who are directed by government

Question 18

market socialism

Answer 18

where government owns most resources but the market determines what g + s are ultimately produced left mostly independent

Question 19

what is the PPC

Answer 19

the product possibility curve is a model used to show the trade off associated with allocating resources between the production of two goods.

Question 20

what is allocative efficiency

Answer 20

its the most efficient allocation of resources
maximises the satisfaction of needs and wants of society
no resources wasted
only one point is allocatively effecient

Question 21

what is technical efficiency

Answer 21

relationship between resource inputs and outputs
where productivity is at its max and average costs are at a minimum
improved if workers are able to produce more g + s per hour worked

Question 22

what is dynamic efficiency

Answer 22

how quickly an economy can reallocate resources to achieve allocative efficiency
relates to speed of adjustment
requires mobile resources and a flesible workforce, takes time since prices are sticky

Question 23

what is inter-temporal efficiency

Answer 23

balancing the allocation of resources between different time periods
concern about how resources will be managed in the future to meet wants and needs
factors such as earths ecosystem effect this creating greater problems of relative scarcity
level of consumption