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G9 + 10 IH > unit 4 - economic agents > Flashcards

unit 4 - economic agents Flashcards

1
Q

Factors of Production

A

Land
Labour
Capital - money
Entrepreneurship - skills required to start a business

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2
Q

Demand in economics defination

A

Amount of product that consumers are willing and are able to purchase

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3
Q

Scarcity in economics defination

A

Lack of resources, Demand is greater than the resources available.

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4
Q

Resource allocation is done based on

A

level of scarcity

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5
Q

What is a market?

A

A place where consumers and producers meet to exchange goods and services

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6
Q

A market functions on

A

demand and supply

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7
Q

Demand and supply determine the

A

price of the product

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8
Q

What is COGS?

A

Cost of goods sold - determines the price alongside demand and supply

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9
Q

Free will

A

Consumers decide the product is worth more than its price hence they buy it

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10
Q

Law of demand

A

The lower the price of the product the more the demand, downwards on graph

Based on buyers’ perspective.

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11
Q

Law of supply

A

The higher the price the higher the quantity supplied, upwards on graph

Based on seller’s perspective.

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12
Q

Equilibrium Market Price

A

Point of the graph of law of demand and supply where both lines intersect, it is the ideal selling price for a product with max supply and max profit

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13
Q

Surplus

A

When supply is more than demand because of the price

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14
Q

Shortage

A

When demand is more than supply because of the price

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15
Q

If the price is more than equilibrium,

A

Surplus

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16
Q

If the price is less than equilibrium,

A

Shortage

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17
Q

Households give Businesses

A

Labour and capital

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18
Q

Businesses give Households

A

Goods and services

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19
Q

What can change the demand of a product without touching its price?

A

Quality
Change in situation
Adv. Campaign, Marketing
Population Demographic
The income situation of common people
Belief, Tradition and Festival
Trend, Style and Influence

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20
Q

What can change the supply of a product without touching its price?

A

Raw Material/Change in COP (cost of production)
Technology
Natural Condition/Weather
Taxes/Subsidies

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21
Q

Externality

A

A cost or benefit that affects a third party who is not directly involved in the activity and not directly involved in a transaction

22
Q

Example of negative externalities with real life example

A

A factory dumping smoke into the air. The factory avoids the cost of cleaner production, but residents suffer from respiratory problems. This creates a burden not reflected in the market price.

Example = Beijing’s Air Pollution
Rapid industrialization and vehicle use in Beijing caused severe smog, leading to increased respiratory diseases, reduced life expectancy, and significant healthcare costs.

23
Q

Example of positive externalities with real life example

A

Vaccinations. While you get protection from getting sick, those around you also benefit from reduced risk of infection. This positive impact isn’t captured by the price of an individual vaccination as it impacts lots of people.

Example = Polio Eradication in India
India’s immunization drive led to the eradication of polio in 2014, benefiting public health and productivity while reducing long-term medical costs.

24
Q

Parts of an economy

A

People (households)
Businesses
Government
Banks

25
Q

3 main questions to ask while production of something?

A
  • What to produce?
  • How to produce?
  • Who will produce?
26
Q

What is an economy?

A

Interconnected web between producers and consumers

27
Q

Households role in an economy and circle of flow of income

A

decide What to buy from and where to buy from

They also give the factors of production to businesses and capital for the goods and services they use

28
Q

Businesses role in an economy and circle of flow of income

A

decide What to sell and at what price

They also provide goods and services alongside wages, rents, interests and profits back to the households

29
Q

Government role in an economy and circle of flow of income

A

Gain profit from tax given by business and households. They use this tax in welfare programs.

In circle of flow of income, government buys stuff to input money through gov expenditure and gets this money from Taxes

30
Q

Price ceilings

A

Gov sets a maximum price for a good/service in a specific market

31
Q

Price Floors

A

Gov sets a minimum price for a good/service in a specific market

32
Q

Types of economies

A
  1. Traditional
  2. Command
  3. Market
  4. Mixed
33
Q

Traditional Economy

A

Households are responsible for production of product
Only produce for family and you have full control over allocation of resources and production

Eg - Hunter Gatherer Ancestor.

34
Q

Command Economy

A

Production is determined by the government
It dictates allocation of resources

Eg - Slavery and Feudalism.

35
Q

Why would a command economy not work?

A

Centralised control
Lack of flexibility
Hinder innovation and efficiency
Gets boring (stagnant) over time

36
Q

Market economy

A

Based on consumer and producer’s voice and choice
Price and allocation of resources is determined by supply and demand

37
Q

Mixed economy

A

Mix of command and market economy
Most common type of economy found in the world today.
Price is still determined by supply and demand system but with little government intervention for regulation and stability of the economy

38
Q

Why and how do governments intervene in market?

A

Governments intervene in markets to address inefficiencies, promote social well-being, and provide public goods. They use regulations, taxes, subsidies, and spending to achieve these goals.

39
Q

Subsidies

A

A financial benefit or support given to individuals or institutions, usually by the government.

40
Q

Role of banks in markets and in circle of flow of income

A

Act as middleman for depositors and borrowers. Provides financial services for economic stability.

They also using savings from households to invest back into businesses

41
Q

Injections in the circle of flow of income

A

Investments (done by banks), government expenditure, exports

42
Q

Leakages in the circle of flow of income

A

Savings, Taxes and Imports

43
Q

Recession

A

Period of economic decline characterized by a decrease in GDP, income, employment, trade because of drop in consumer demand, decrease levels of investments, financial crisis.

44
Q

Inflation

A

Sustained increase in general price level of goods and services over time caused due to rising demands for goods exceeding supply.

45
Q

sectors of an economy

A

Primary Sector
Secondary Sector
Tertiary Sector
Quaternary Sector

46
Q

Primary sector of economy

A
  • Includes all industries that are involved in the extraction of natural resources or raw materials
  • Most strong in terms of employment in less developed or traditional economies
  • The number of workers in this sector decrease as economy develops to advancements in technologies
  • Eg - Forestry, mining, farming and fishing industries
47
Q

Secondary sector of economy

A

Includes all industries that are involved in the production of finished goods
Converts raw materials obtained by the primary sector into finished goods
Further divided into two categories - Heavy Industries and Light industries
- Heavy industries = steelmaking, construction, ship building and aerospace engineering
- Light industries = clothing, food and beverages, sporting goods and home appliances

48
Q

Tertiary sector of economy

A
  • Includes all industries that provides services to other businesses or consumers
  • Eg - Retail, healthcare, insurance, financial and entertainment
  • Usually employs the majority of the workforce in developed economies due to need for human interaction which isn’t possible with automation
49
Q

Quaternary sector of economy

A
  • Includes all industries that are involved in the creation and distribution of knowledge
  • Eg = Research and development, education, information technology and consulting
  • This is an extension of the classical 3 sector model and a further distinction of the tertiary sector
50
Q

The great recession

A

Happened in the US from 2007 to 2009

Many people had bought subprime mortgages, but due to the value of the housing sector going down, many people werent able to pay off these debts.

Hence banks (those who gave the mortgages) and homeowners both lost a lot of money causing a recession

People had less money and hence spent less money, leading to fewer demand from consumers and overall economic decline

51
Q

How was the great recessions solved?

A

Bank bailouts, government spending programs and aid from alliances

52
Q

how do governments control inflation

A

Adjust interest rates on savings
Reduce gov spending to reduce inflation
Gov increse the taxes

G9 + 10 IH (7 decks)

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