1.1 The Nature of Economics Flashcards

Question

What is specialisation ?

Answer 1

- concentrating on a specific product or task can happen at all levels: - business (car manufacture) - region in a country (London Finance) - a country (Norway leading oil exporter)

Answer 2

✅ greater productivity ✅ greater choice for consumers = more profit ✅ more motivated + quicker workforce ✅ reduced training costs ➡️ only need to be trained in one task ✅ increased competitiveness ➡️ increased output = decreased price per unit ✅ better quality end product/services due to being more knowledgable and skilled + less mistakes likely to be made ✅ workers can focus on their job and build up expertise ✅ time saving ➡️ workers do not need to constantly change tasks/move around

Answer 3

❌ job can be repetitive thus staff can lose motivation + become less productive/quit ➡️ will have to recruit more staff ❌ employees may expect higher wages as they are more skilled/ knowledgeable ❌ more specialised = less flexible a business becomes

Answer 4

✅ global trade increased as more exports = economic growth ✅ output increases (GDP) ➡️ leads to improved standard of living ❌ country is less self sufficient ➡️ rely on other countries which makes them vulnerable

Answer 5

✅ higher wages if business is making more profit for specialised work ✅ sense of achievement to be good at something ✅ improved skills at that jobs

Answer 6

❌ repetitive doing the same task everyday becomes boring ➡️ lower motivation ❌ quality may suffer ❌ may eventually be replaced by machinery ❌ workers may move to less boring jobs which creates a labour turnover problem ❌ over specialisation = hard to find other jobs (contributes to structural unemployment)

Answer 7

- where production is broken down into many separate tasks/roles (each carried out by a different person ➡️ a type of specialisation) - increases output per person as people become proficient through constant repetition of tasks and so decreases cost per unit ➡️ leading to decrease in prices for consumers eg. Human rights lawyers - Adam Smith supporter of this ➡️ wrote about the splitting up the production process of pins into 18 different parts it in his book (productivity stemmed from workers being able to focus on just one task)

Answer 8

1. a medium of exchange: money is a measured instrument that can be used to purchase/trade goods between people (specialisation + division of labour requires a mean of exchanging goods/services) 2. a measure of value: money functions as a unite of account (provides a common measure of value of goods/services being exchanged) 3. a store of value: to be a medium of exchange, money must hold its value over time (other stores of value eg. land + works of art) ➡️ can lose it value over time due to inflation but more liquid than other stores 4. a method of deferred payment: money can be payed later for something we consume now

Answer 9

- traditional economy: each new gen. retains the economic position of its parents & grandparents - command economy: the state/govt controls all resources - free market: based on consumers buying decisions - mixed economy: combines the command & free market models

Answer 10

*govt decides how resources should be allocated and what should be produced ✅ welfare maximised: govt has more control over economy so they can minimise inequality by redistributing income fairly ✅ low unemployment: govt can try to provide everyone with a job & salary ✅ prevent monopolies: when single firms dominate the economy

Answer 11

❌ poor decision making: lack of info means govt often make slow/poor decisions of what needs to be produced ❌ restricted choice: consumers have limited choice as firms make what they are told to make ❌ lack of risk taking and efficiency: no incentive as the govt owns all businesses therefore there’s no competition and no one makes a profit except from govt

Answer 12

🔔 goods are allocated based on S&D and the price mechanism ➡️ no/little govt intervention ✅ efficiency: high quality products with best value (price/quality) any product can be sold so must be efficient in production ✅ entrepreneurship: market rewards good ideas encouraging risk taking + innovation as can make a lot of money ✅ lots of choice for consumers (not limited)

Answer 13

❌ inequality: leads to huge difference in income (unfair) ➡️ if you can’t work you get no income ❌ non profitable goods are not made: street lighting, drugs for rare treatments, schools, care for elderly would happen as no profit ❌ monopolies: successful firms dominate the market which can be abused (very high prices ect) ❌ illegal things (drugs/guns) can be sold

Answer 14

- when both the govt and the market play a part in allocating resources (both public and private sector) ➡️ in a pure free market economy there is no public sector visa versa for a pure command economy

Answer 15

1. Changing the law for force/stop firms from doing something 2. Changing tax levels to incentivise or punish behaviour 3. Govt can intervene in the economy by buying/selling/providing goods and services eg. NHS, education, defence ect

Answer 16

🔔 supported the free market + described how the INVISIBLE HAND would allocate resources in societies best interests - consumers are motivated to maximise profits + the invisible hand leads to lots of consumer choice and lower prices - invisible hand will lead to the factors of production being allocated exactly where they need to be in the economy + S&D will lead to price levels that work for both the consumer and seller - govts do not need to be involved in the market except to create the conditions for businesses to thrive/ supporting role - believed capitalism is highly efficient + everything is determined by competition vs self interest (ultimately is good for the economy) - also believed in the benefits of specialisation and division of labour

Answer 17

🔔 believed an economy should exist for the benefit of the workforce BUT had little on how the command economy would work - critiqued the desire for profits, business owners desire for profits will lead to them exploiting the workforce ➡️ low wages + few rights + replace them by machinery - specialisation = reduce job satisfaction + loss of creativity - over production + underconsumption will occur (wasting resources by making more than what’s sold) - workers will eventually revolt and take over production (won’t put up with it forever) - his ideas led to the rise of communism in the 20th century

Answer 18

🔔 should let free market economy do its thing and govts should have minimal interference except from support (build roads, schools ect) - govts shouldn’t intervene to allocate resources as they lack info required to allocate them in a way that most benefits society (individual consumerism and producers have best knowledge on what they need) ➡️ the allocation of resources should be left to them and the price mechanism - price is set by the forces of supply and demand + shows what both consumers and producers want ➡️ S&D therefore will naturally allocate resources more efficiently than govts can

1.1 The Nature of Economics Flashcards

(42 cards)