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Econ AS > 1.1 > Flashcards

1.1 Flashcards

1
Q

Uses of opportunity cost (3)

A
  • consumers use to decide what to spend money on
  • producers use to decide what/how to produce goods and services
  • government use it to decide what politics to choose
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2
Q

Causes of economic growth (3)

A
  • increase in quantity of factors of production
  • increase in quality of factors of production
  • a combination of both
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3
Q

What things can cause a point to be under the PPF curve? (2)

A
  • inefficient use of resources

- underutilisation of resources

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4
Q

What does increased productivity lead to? (3)

A
  • higher output + quality
  • higher living standards
  • more efficient use of resources
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5
Q

Advantages of division of labour? (4)

A
  • Workers become more skilled through repetition of tasks
  • the productivity of workers rises, so output rises
  • workers are more efficient so time is saved
  • workers are easier and cheaper to train
  • higher quality of goods
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6
Q

Disadvantages of the division of labour? (2)

A
  • Repetition may result in boredom ->lower morale -> lower quality of goods
  • simplified roles could result in a reduction in workers pride
  • workforce does not have wide industrial training and thus could suffer from structural unemployment
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7
Q

Advantages of specialisation (3)

A
  • better quality + quantity
  • efficient resource use
  • higher economic growth -> better living standards
  • comparative advantage = greater output
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8
Q

Disadvantages of specialisation (4)

A
  • over reliance on a few industries is risky
  • increased interdependence reduces self sufficiency
  • workers receive little training = struggle to find work = suffer structural unemployment.
  • Mass-produced standardised goods may lack variety which damages consumer welfare.
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9
Q

Results of firms in free markets having profit motive

A
  • Firms can develop own new products

- Firms incentivised to meet consumer demand

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10
Q

what type of science is economics and why?

A

Economics is a social science which means it studies society and relationships between people

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11
Q

what are positive statements?

A

Positive statements are objective statements that can be refuted

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12
Q

what are normative statements?

A

Normative statements are subjective statements – i.e. they carry value judgments

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13
Q

What is microeconomics?

A

Microeconomics considers the economics of everyday life such as the decisions that we as households take and the impact of businesses in different and related industries

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14
Q

what is the economic problem?

A

The basic economic problem is finding efficient and fair ways to meet infinite wants with finite resources.

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15
Q

Factors of Production

A
  • Land: The stock of natural factor resources available for production
  • Labour: The quantity/quality of human input available for production process.
  • Capital: Man-made goods used to supply other products
  • Enterprise: Entrepreneurs organise inputs and take risks when seeking to exploit market opportunities.
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16
Q

What is automation?

A

Automation is a production technique that uses capital machinery & new technology to replace or enhance human labour

17
Q

what does the rate of extraction of non renewable resources depend on?

A

The rate of extraction of finite resources depends in part on the current market price.
- Higher prices = incentive to increase rate of extraction since there is an opportunity to make higher profits.

18
Q

difference between micro ppf and macro ppf?

A

micro - look at two specific products

macro - choices an economy might have between capital goods and consumer goods

19
Q

what is a Pareto efficient outcome?

A

if the only way to make one person better off is to make another person worse off.

20
Q

what can cause a PPF to shift inwards?

A
  1. natural disaster effects
  2. war
  3. large scale net migration out of the country
  4. long term productivity fall
21
Q

four main functions of money?

A
  • medium of exchange
  • store of value
  • unit of account
  • standard of deferred payment
22
Q

free market economy

A

markets allocate scarce resources through the price mechanism

23
Q

command economy

A

associated with communism, government distributes scarce resources

24
Q

mixed economy

A

some resources owned by public sector, some resources owned by private sector

25
Q

advantages of free market competition?

A
  • efficient allocation of resources
  • competitive prices
  • innovative dynamism
  • profit motive invites investment
26
Q

disadvantages of free market

A
  • can lead to wealth inequality
  • businesses can develop monopoly power
  • user/non provision of our public goods
  • under provision of merit goods, such as health and education
  • externalities
27
Q

disadvantages of central planning

A
  • lack of incentives = less productivity
  • lack of innovation
  • slow to react to changing wants and needs of customers
28
Q

Ceteris paribus definition

A

Holding all other factors/variables constant

29
Q

Each factor of production and their reward

A

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

30
Q

Define PPF

A

Production possibility frontier:
- maximum productive potential of an economy, using a combination of two goods or services, when resources are fully and efficiently employed

31
Q

Define specialisation and and who backed it

A

Specialisation - when each worker completes a specific task in the production process
Adam smith believed this would lead to increased worker productivity

32
Q

Value judgements can influence

A

Economic decision making

33
Q

Define PPF

A

Maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and technology

34
Q

The government’s role in a mixed economy:

A
  • creating a framework of rules
  • supplements and modifies the price system
  • redistributes income
  • stabilises the economy.

Econ AS (16 decks)

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