unit one Flashcards
1
Q
define scarcity
A
- the problem of finite resources and infinite wants
- it is a universal problem
- it is permanent
- Can be shown on a PPC curve
2
Q
define choice
A
- it is a universal problem
- consumers wish to maximise utility
-firms wish to maximise profit - government wishes to maximise welfare
- Can be shown on a PPC curve
3
Q
define opportunity cost
A
- the next best option forgone when an economic decision is made
- can be shown on a PPC curve
- shows the sacrifice of one good for increased production of another
4
Q
define economic goods
A
- they have a monetary value
- their production has an impact on the environment
- they are made from finite resources
- eg, TV
5
Q
define shortage
A
- when demand is greater than supply
- eg, a famine
6
Q
define free goods
A
- they have no price
- they do not use up scarce resources
- they are abundant in supply
7
Q
define public goods
A
- they have positive exernalities
- when one person consumes it doesnt reduce the amount others can consume
- they benefit all of society
- government subsidises these as it increases public welfare
- eg, education, NHS
8
Q
define merit goods
A
- they are under consumed by the market
- government subsidises these as they wish to increase consumption of these
- they have positive externalities
- eg, education, public transport
9
Q
define demerit goods
A
- they are over consumed by the market
- government taxes/bans these as they wish to decrease consumption of these
- they have negitive externalities
- eg, Class A drugs
10
Q
what can be shown by a PPC curve
A
- opportunity cost
- scarcity
- choice
11
Q
define PED
A
- PED is a measure of responsiveness of demand after a change in price
- PED = % change in quantity demanded DIVIDED BY % change in price
12
Q
what are the factors that influence PED
A
- addictiveness
- closeness of substitutes
- necessity or luxury
- income
- utility
- loss of value over time
13
Q
define demand
A
the quantity of a good or service that consumers are willing and able to purchase at a given point of time.
14
Q
what is diminishing marginal utility
A
- as the jumber of units increases, utility also decreases
- eg increased income becomes less useful beyond a point
15
Q
what is a veblen demand curve
A
- c shape
- snob effect
- status or quality
- eg rolex watch
16
Q
what is a giffen curve
A
- > shape
- essential goods
- people will reduce consumption of other goods or services to increase consumption of these
- eg potatoes in the irish potato famine
17
Q
define total utility
A
measurement of total satisfaction an individual recieves from a specific amount of a good/service
18
Q
define marginal utility
A
measurement of the satisfaction an individual recieves from consuming one additional unit or a good or service
19
Q
define speculation
A
When individuals make decisions about buying or selling depending on expectations on future prices eg, Stock exchange
20
Q
what are the determinants of demand
A
- tastes
- season
- price of other goods
- income
- population size
- advertising
- closeness of substitutes
21
Q
define supply
A
supply is the willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period
22
Q
how do taxes and subsidies impact the supply curve
A
- taxes -> left shift in supply
- subsidy -> right shift in supply
23
Q
what is a subsidy
A
- a subsidy is money given by the government to increase supply and lower the price of a good or service
- Government subsidise goods or services that have positive externalities
24
Q
what is a tax
A
- a tax is money taken by the governmest to decrease supply and increase the price of a good or service
- Government tax goods or services that have negitive externalities.
25
what is a progressive tax
takes a larger percentage from higher income than lower incomes
eg income tax
26
what is a regressive tax
takes a larger percentage from those with low income than those with high incomes eg VAT
27
what is minimum price control
A minimum price is when the government don't allow prices to go below a certain level.
- the floor shows the minimum price
28
what is maximum price control
- A minimum price is when the government don't allow prices to go above a certain level.
- it is used to try and limit prices and control inflation
- the ceiling shows the maximum price
29
what do the following cost curves look like
- fixed cost
- average cost
- marginal cost
fixed - straight line
average - smile shape
marginal - nike swoosh
30
what are the pros and cons of division of labour
PROS
-allows workers to become more specialised leading to increased productivity
- Less training required
CONS
- creates boring, repetitive jobs (screwdriver jobs).
- decreased motivation
example -apple products
31
define specialisation
when a firm concentrates its labour and resources on a certain type of production that is most beneficial to create high productivity and maximise income
eg, UK - banking
32
define
- production
- productivity
production- total amount produced
productivity- average amount produced in a given period of time
33
what is a
- monopoly
-oligopoly
- duopoly
- monopoly - one firm controls the market
- oligopoly - many firms control the market
- duopoly- two firms control the market
34
what is
- a free market
- a planned economy
- FM - economic system based on supply and demand with no government intervention, Firms set a price - not government. Eg UK, Ausralian
or US economy (capitalist)
- PE - economic system where the government are in charge of the economy. (production and distribution of goods) Eg china, North Korea (communist)
35
what is
- the market equilibrium
- the price mechanism
- ME-
