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Economics A Levels > Economic Methodology And The Economic Problem > Flashcards

Economic Methodology And The Economic Problem Flashcards

1
Q

Why is economics considered to be a social science

A

Looks at the behaviour of humans, either as individuals or as part of organisations, and their use of scarce resources

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2
Q

Assumption known as ceteris paribus

A

‘All other things remaining equal’

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3
Q

Positive statements

A

Objective statements with evidence

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4
Q

Normative statements

A

Subjective statements-opinions

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5
Q

Four factors of production

A

Land, labour, capital and enterprise

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6
Q

Land

A

Includes all the natural resources in and on it

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7
Q

Labour

A

The work done by people who contribute to the production process

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8
Q

Capital

A

Equipment, factories and schools that help to produce goods or services

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9
Q

Labour force

A

The population who are available to do work

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10
Q

Enterprise

A

The entrepreneurs who take risks and create things from the other three factors of production

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11
Q

The economic problem

A

How can the available scarce resources be used to satisfy people’s infinite needs and wants as effectively as possible ?

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12
Q

Scarce

A

Limited amount of

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13
Q

Goods

A

Tangible items

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14
Q

Services

A

Intangible items

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15
Q

The economic agents (participants)

A

Producers, consumers, governments

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16
Q

Governments can be thought of as

A

A government sets the rules that the other participants in the economy have to follow, but also produces and consumes goods and services.

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17
Q

Incentive

A

a thing that motivates or encourages someone to do something

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18
Q

Government decisions that effect how resources are allocated

A

Have to decide how much to intervene in the way producers and consumers act

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19
Q

Trade off

A

When you have to choose between conflicting objectives because you can’t achieve all your objectives at the same time. It involves compromising, and aiming to achieve each of your objective a bit

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20
Q

Opportunity cost

A

The next best alternative that you give up in making that decision

21
Q

What does a PPF (production possibility frontier) show

A

The options that are available when you consider the production of just two types of goods or services

22
Q

What would cause an outward shift in the PPF

A

Increased resources, improved technology, improvements to labour

23
Q

What does an outward shift of a PPF show

A

Economic growth

24
Q

Assumption about the worker in a free market (rational)

A

Would prefer to have their wages, but less free time

25
Q

Assumption about the employer in a free market (rational)

A

Would prefer to have less money, and to know that there’s someone there to do some work

26
Q

The way a free market allocates resources are

A

Based on supply and demand and the price mechanism

27
Q

Free market advantages

A

Efficiency- only products of the best value will be in demand. Entrepreneurship- rewards for good ideas can make entrepreneurs a lot of money. Choice- the incentives for innovation can lead to an increase in choice for consumers.

28
Q

Free market disadvantages

A

Inequalities- market economies can lead to huge differences in income. Non- profitable goods may not be made. Monopolies- market dominance can be abused

29
Q

Advantages of Command economies

A

Maximise welfare- prevent inequality and redistribute income fairly. Low unemployment- try to provide everyone with a job and a salary. Prevent monopolies

30
Q

Disadvantages of command economies

A

Poor decision making- may make poor and slow decisions about what needs to be produced restricted choice- limited choice in what they can consume. Lack of risk-taking and efficiency.

31
Q

When free markets result in undesirable outcomes

A

Market failure

32
Q

How do governments often intervene when there’s a market failure

A

Change the law, offer tax breaks or create some other kind of incentive, or by buying or providing goods or services

33
Q

Mixed economy public and private sectors

A

Public- the government. Private- businesses that are privately owned

34
Q

The margin

A

The change in a variable cause by an increase of one unit of another variable

35
Q

What does the traditional economic theory assume about economic agents and their utility

A

Want to maximise their utility

36
Q

Marginal utility

A

The benefit gained from consuming one additional unit of a good

37
Q

Total utility

A

The overall benefit gained from consuming a good

38
Q

The law of diminishing marginal utility

A

For each additional unit of a good that’s consumed, the marginal utility gained decreases

39
Q

Producers economic objectives

A

To maximise profits, maximise total sales or the firm’s market share, (some firms) ethical objectives

40
Q

Consumers economic objectives

A

Maximise their utility, while not spending more than their income.

41
Q

Government economic objectives

A

Maximise the pubic interest: Economic growth, full employment, equilibrium in the balance of payments, low inflation

42
Q

The key assumptions used in traditional economic theory are:

A

Economic agents are utility maximisers, economic agents are rational

43
Q

Homo economicus

A

Rational individual

44
Q

Behavioural economists argue that there are lots of restrictions on people’s ability to make rational decisions

A

The time available to make a decision is limited, not all information is available, due to vast amounts of data people might not be good at calculating the costs of alternatives.

45
Q

Positive statement

A

a statement of fact that can be scientifically tested to see if it is correct or incorrect

46
Q

Normative statement

A

A statement that includes a value judgement and cannot be refuted just by looking at the evidence.

47
Q

Economic welfare

A

the well-being and prosperity of individuals, households, or society as a whole within an economy

48
Q

Economic system

A

How and for whom to produce for

49
Q

Key factors that contribute to economic welfare

A

. Income and Wealth Distribution
. Employment opportunities
. Access to basic needs
. Quality of life
. Social stability and security
. Economic growth
. Environmental sustainability

Economics A Levels (20 decks)

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