1.1 Demand

Question 1

What is the problem with all economies at the moment?

Answer 1

due to scarcity, governments have to allocate resources carefully, making decisions about how they should be produced and distributed.

Question 2

What is scarcity?

Answer 2

Limited availability of economic resources for society’s unlimited demand.

Question 3

What are the economic resources?

Answer 3

the materials we use to produce goods and services.

Question 4

What is land? and give an example.

Answer 4

Natural resources. e.g. fields for farmers.

Question 5

What is labour? and give an example.

Answer 5

Human resources e.g. tractor drivers

Question 6

What is capital? and give an example.

Answer 6

goods that produce other goods e.g. tractor

Question 7

What is enterprise? and give an example.

Answer 7

Land, labour and capital e.g. farm business

Question 8

How does labour get paid?

Answer 8

A wage (monthly) or a salary (weekly)

Question 9

How does land get paid?

Answer 9

Rent

Question 10

How does capital get paid?

Answer 10

Interest.

Question 11

What do countries need to decide?

Answer 11

What to produce? consumer demand
How to produce it? firms and profit
And for whom? who can afford it

Question 12

What is opportunity cost?

Answer 12

Cost of next best alternative

Question 13

What is command economy?

Answer 13

Economy controlled by government.

Question 14

What is free market economy?

Answer 14

Controlled by market.

Question 15

What kind of economy is the UK?

Answer 15

UK is a combination of both.

Question 16

What is the law of demand?

Answer 16

As price increases, quantity demanded decreases. Ceteris paribus.

Question 17

What is ceteris paribus?

Answer 17

All else being equal.

Question 18

What is the relationship between price and quantity?

Answer 18

Negative relationship.

Question 19

If there is a change in quantity demanded what will happen?

Answer 19

It will move along the curve.

Question 20

If there is a change in demand?

Answer 20

The curve shifts.

Question 21

What are the factors that shift the demand curve?

Answer 21

ICI PASTE
Income
Complements
Interest
Population
Adverts
Substitutes
Tastes
Expectations

Question 22

What is PPF?

Answer 22

Product Possibility Frontier = a curve showing the maximum output for two products and combinations of these products that can be produced with existing resources.

Question 23

What are the assumptions with the PPF?

Answer 23

Only a specific time period.
Technology is unchanged.
Total available resources remain the same
all resources are effectively used.

Question 24

On PPF what does point A mean?

Answer 24

We have right number of resources to satisfy demand.

Question 25

On PPF what does point D mean?

Answer 25

We don't have enough resources.

Question 26

On PPF what does point X mean?

Answer 26

We aren't using enough resources.

Question 27

What is PPC?

Answer 27

Another name for PPF = A way of showing combination of two goods that can be produced with a set amount of resources.

Question 28

On a flat PPC what does point A show?

Answer 28

Producing efficiently.

Question 29

On a flat PPC what does point D show?

Answer 29

Currently unobtainable (scarcity)

Question 30

On a flat PPC what does point X show?

Answer 30

Not maximising potential.

Question 31

What is elasticity?

Answer 31

Straight line = gradient is constant = elastic relationship

Question 32

What is inelasticity?

Answer 32

Curve = Gradient is inconsistent = inelastic relationship.

Question 33

What is choice for economies on the PPF curve?

Answer 33

A country/firm must decide that if they want more of one thing they need less of the other.

Question 34

If the point D at the centre of the PPC curve...

Answer 34

The opportunity cost is smaller because distance between Q and origin is smaller.

Question 35

If the points B and C represent...

Answer 35

The opportunity cost is large because distance between Q/P and origin is larger.

Question 36

What is supply?

Answer 36

The amount of goods that are available to consumers. Producers and firms aim to profit maximise.

Question 37

What is demand?

Answer 37

a consumer’s desire to purchase good at a given price. Consumers who aim to utility maximise.

Question 38

What is consumer surplus?

Answer 38

Consumer is willing to pay higher than market price.

Question 39

If there is a lot of quantity the price is...

Answer 39

Low

Question 40

If there is little quantity the price is...

Answer 40

High

Question 41

What is sustainability?

Answer 41

Meeting the economic goals of today without compromising the economic goals of the future.

Question 42

What are Free Goods?

Answer 42

Goods with no opportunity cost, and no scarcity e..g sunlight.

Question 43

What is positive economics?

Answer 43

Something that can be demonstrated or proven and is based on facts.

Question 44

What is normative economics?

Answer 44

Something that can be debatable based on opinion and cannot be proven.

Question 45

What is the market?

Answer 45

a place where parties can meet to fulfil a transaction. Markets establish the prices of goods and services that are determined by supply and demand.

Question 46

What is the price mechanism?

Answer 46

he means by which decisions of consumers and businesses interact to determine the allocation of resources.

Question 47

What is consumer surplus?

Answer 47

when the price consumers pay for a product or service is less than the price they're willing to pay.

Question 48

What is producer surplus?

Answer 48

the total amount that a producer benefits from producing and selling a quantity of a good at the market price

Question 49

Four types of economic Goods

Answer 49

Land, Labour, Capital, Enterprise.

Question 50

What is Equilibrium?

Answer 50

a point where demand and supply are balanced which is the optimal state for the market.

Question 51

What is current account?

Answer 51

The flow of funds from trade in goods and services, including other income flows and transfers.