1.1 Nature of economics Flashcards

Question

Productive potential

Answer 1

Amount of output an economy produced if all FOP were fully and efficiently employed

Answer 2

Not part of team. Workers do not feel satsifacation of producing finished product. CAN REDUCE MOTIVATION AND PRODUCTIVITY

Answer 3

specialisation of labour in specific tasks, intended to increase productivity. advantages: workers become more skilled through repetition of tasks, productivity rises so output rises, time saved by workers focussing on narrow range of tasks, workers are easy and cheap to train. disadvantages: repetition can lead to boredom, simplified job roles can reduce pride workers feel in their job

Answer 4

used to judge value of G/S

Answer 5

facilitates transactions between buyer and seller

Answer 6

making payments at a later date

Answer 7

1. Higher output - from increased productivity and efficiency (workers become more skilled through repetition) 2. Increased variety for consumers 3. Larger market - economies of scale exploitable 4. Workers are easier and cheaper to train

Answer 8

1. Structural unemployment due to lack of training and skills (occupational immobility) 2. Over-reliant, interdependent, more vulnerable to global shocks 3. Bored workers can cause morale drop, drop in productivity 4. Reduce pride they feel in work. 5. Reduction in self-sufficiency

Answer 9

Business focusses on prod of limited scope of products to gain greater productive efficiency

Answer 10

Money can be saved and exchanged

Answer 11

Resources allocated by government

Answer 12

No state intervention, price mechanism

Answer 13

Exists when economic system produces G/S which reflect wishes of consumers.

Answer 14

Resources partly allocated by state and price mechanism

Answer 15

FREE MARKET ECONOMIST writes about invisible hand of resource allocation warned of monopolies, hence recognised need for some gov intervention maintain law and order, because the many poor would want to take over the property of the rich issuing of patents and copyright (to protect invention) providing national defence, regulating the banking sector, building infrastructure, and public goods

Answer 16

STRONG SUPPORTER OF FREE MARKET argued strongly against command economies beef w Keynes who was supporter of large gov intervention little gov intervention - except to maintain law and order and safety net for those who cannot work

Answer 17

FOCUSSED ON NEGATIVES OF FREE MARKET Developed Smith's ideas. Supporter of free market economies - large increases in productivity and output Owners would push wages to subsistence levels and exploitation will occur. exploited workers would work together and overthrow capitalism in a revolution Capitalism becomes socialism

Answer 18

not all factor inputs (such as land, labour and capital) are equally suited to producing different goods leading to lower productivity Cause of concave PPF

Answer 19

efficient allocation of scarce resources – factor resources tend to go where the expected profit is highest Competitive prices for consumers as suppliers look to increase and then protect their market share Innovative dynamism provides major benefits to consumers by bringing them new goods and new processes profit motive stimulates investment which encourages economies of scale arising from big-scale production and ultimately lower prices for consumers Competition through trade helps to reduce monopoly power and increases choice whilst lowering prices

Answer 20

Free market activity can lead to a rise in income and wealth inequality Businesses can develop monopoly power which leads to higher prices and damage to consumer welfare Under or non-provision of pure public goods Under-provision of merit goods such as health and education – which many cannot afford – leading to lower social welfare Free markets may fail to address negative externalities from production and consumption leading to unsustainable economic growth Deregulated financial markets often prone to bouts of instability – the fallout from which affects millions not directly involved less equitable distribution of income and wealth because owners of capital and land pass privilege on to children

Answer 21

measure of statistical dispersion intended to represent the income inequality or the wealth inequality within a nation or a social group

Answer 22

Bureaucratic costs - petty officialdom can lead to wasteful inefficiencies and therefore higher costs government planners are unlikely to be as accurate as the market in determining suitable prices leading to numerous shortages and surpluses Absence of incentives for both workers and businesses can damage productivity and lead to large levels of over-employment / hidden unemployment and, ultimately, lower living standards Low productivity and weak incentives can lead to rising losses for many state-owned enterprises. The incentive to innovate is limited leading to a less dynamic economy Changing consumer needs and wants are not expressed as preferences in markets – the state is often slow to react to these information failures and endemic corruption higher risk of mal investment driven by political motivations HOWEVER, tend to have higher income and wealth inequality than other economies.

Answer 23

cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (unit) costs of production.

Answer 24

Value of next best alternative foregone

Answer 25

Inefficient and underutilisation of resources

Answer 26

Effectiveness of productive effort (rate of output per unit input)

Answer 27

1. Structural unemployment due to lack of training and skills (occupational immobility) 2. Over-reliant, interdependent, more vulnerable to global shocks 3. Bored workers can cause morale drop, drop in productivity 4. Reduce pride they feel in work. 5. Reduction in self-sufficiency

Answer 28

medium of exchange store of value measure of value method of deferred payment

1.1 Nature of economics Flashcards

(52 cards)