1.1 and 1.2 definitions

Question 1

What is scarcity

Answer 1

Whene there are unlimited wants and finite resources.

Question 2

What is opportunity cost?

Answer 2

The next best alternative foregone

Question 3

What is the Production Possibility Curve?

Answer 3

A line that shows differenct combinations of 2 goods an economy can produce if all resources are used up.

Question 4

What are the causes of positive economic growth?

Answer 4

• New technology
  -improved efficiency
• Education and training
• New sources

Question 5

What are the causes of negative economic growth?

Answer 5

• Obsolete machinery
• War
• Drought
• Pandemics

Question 6

Revenue formula

Answer 6

Price x Quantity

Question 7

Profit formula

Answer 7

Revenue- production price

Question 8

What is the definition of demand?

Answer 8

Amount of goods and services that consumers are willing and able to buy at a specific price at a point in time.

Question 9

What is the relationhsip between price and QD?

Answer 9

Inversely proportional

Question 10

What are factors that may affect the demand curve?

Answer 10

-Advertising: increased awareness of a product

-Income: more disposable income leads to increased spending, but dependnds on the business, e.g. necessities see little change

-Fashion and Tastes: Tastes are constantly changing; particularly true for industries that see rapid change, e.g. fashion is seasonal

-The price of Goods and servcies; price has a inverse relationship with demand

• Demographics Changes; Younger and older people are interested in different things, so changes in the make-up of the population will change demand

Question 11

What is supply?

Answer 11

The quantity of a good that producers are willing and able to sell at each possible price at a given period of time.

Question 12

Relationship between price and quantity supplied

Answer 12

Proportional

Question 13

What are the factors affecting supply?

Answer 13

Production Cost
Indirect taxes
New technology
Natural disasters
Subsisdies

Question 14

WHat are indirect taxes?

Answer 14

Taxes imposed by the government on spending

Question 15

Subsidies

Answer 15

This is government money in the form of a grant given to encourage supply by reducing cost of rpdouction

Question 16

What is the market equilibrium?

Answer 16

Where quantity demanded and quantity supplied are equal?

Question 17

What is excess demand?

Answer 17

When the QD>QS, price is below the equilibrium

Question 18

What is excess supply?

Answer 18

When QS>QD, price is above the equilibrium

Question 19

What is PED?

Answer 19

Price elasticity of demand measures how responsive consumers are to a change in price.

Question 20

What is the formula for PED?

Answer 20

Percentage change in quantity demanded divided by percentage change in price, PED is always negative

Question 21

What is the PED value of a perfectly elastic product?

Answer 21

0, an example of this is medicine as it is always needed no matter the price

Question 22

WHat is the PED value of a inelastic product?

Answer 22

<1, electricity, chocolate, doesn’t change much

Question 23

What is the PED value of unitary demand

Answer 23

1

Question 24

WHat is ped value of elastic product?

Answer 24

1<

Question 25

What is PED value of perfectly elastic?

Answer 25

Infinity

Question 26

WHat are the factors influencing PED

Answer 26

-Time -Income -Necessity -Substitute

Question 27

WHat is the Price elasticity of supply?

Answer 27

Responsiveness of quantity supplied to a change in price.

Question 28

PES formula

Answer 28

%change in QS divided by %change in price, always positive

Question 29

What is elastic PES

Answer 29

1<

Question 30

What is inelastic PES

Answer 30

1>

Question 31

WHat is unitary PES

Answer 31

1

Question 32

What is perfectly elastic PES

Answer 32

inifnity

Question 33

WHat is perfectly inelastic PES

Answer 33

0

Question 34

WHat are the factors influencing PES

Answer 34

Factors of production Availiability of stock Spare capacity. Time

Question 35

What is income elasticity of demand

Answer 35

YED measures the responsiveness of demand to a change in income

Question 36

What is YED formula

Answer 36

%Change in QD / %Change in income

Question 37

What products have a positive YED <1?

Answer 37

Normal goods- better than inferior goods in terms of quality

Question 38

WHat products have a positive YED 1

Answer 38

Luxury goods because they have the best quality, they expereience proportional increases in QD compared to income

Question 39

WHat products have negative YED?

Answer 39

Inferior goods, lower quality compared to normal goods and luxury goods

Question 40

Why is YED useful to producers

Answer 40

Changes in the income within the economy could affect the demand for their products. Knowing htis can help them respond.

Question 41

Why is PED useful to governments?

Answer 41

If it is an inelastic good - Tax more, this becomes the government's revenue If it is an elastic good - Subsidies if the good benefits their society

Question 42

What is privatisation?

Answer 42

When a public sector is sold by the government to become a pirvate sector

Question 43

What effects does privatisation have on consumers?

Answer 43

+Lower prices +Business is more efficient -Higher prices and less choice -Less comperition after takeovers or meges

Question 44

What effects does privatisation have on workers?

Answer 44

+Possibly higher wages -Job losses -Forced to raise productivity -Must adopt flexible working conditions e.g. working on a holiday

Question 45

What effects does privatisation have on businesses?

Answer 45

+Firms become more efficient -More competition -More takeovers an dmerges

Question 46

What are external costs?

Answer 46

Negative spillover effects of consumption or production to third parties

Question 47

What are external benefits?

Answer 47

Positive spillover effects of consumption or production to third parties

Question 48

What is the private cost

Answer 48

costs of an economic activity to individuals or a firm

Question 49

What is the formula and definition for social cost?

Answer 49

Private cost + External cost. Social costs are the costs of an economic acitvity to society as well as an individual or firm

Question 50

What is are private benefits?

Answer 50

Benefit of an economic activity to an individual or firm

Question 51

Formula and definition for social benefity?

Answer 51

private benefits + external benefits. Benefits of an economic activity to society as well as to the individual or firm.

Question 52

What are examples of external costs?

Answer 52

- Pollution -Congestion -Environmental damage