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GCSEs > Economics (paper 1) 📍 > Flashcards

Economics (paper 1) 📍 Flashcards

1
Q

GDP (Gross Domestic Product) definition

A

the total value of goods and services produced in a country annually

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2
Q

What does a rising GDP mean?

A

Individuals are spending more, more employment opportunities are available, more tax is being paid and workers get paid more

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3
Q

Interest definition

A

tells you how high the cost of borrowing is

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4
Q

Opportunity cost definition

A

The cost of the next best alternative forgone

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5
Q

wants definition

A

something we desire

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6
Q

needs definition

A

something essential to survival

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7
Q

What are the 3 factors of the basic economic problem?

A

• What to produce?
• How to produce it?
• Who to produce it for?

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8
Q

Factors of production

A

• Land
• Labour
• Capital
• Enterprise

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9
Q

What type of industry is the Uk?

A

• Tertiary sector
• Also has a lack of resources

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10
Q

Scarcity definition

A

The shortage of a resource as a result of an unlimited want or need

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11
Q

Basic Economic Problem defintion

A

Limited resources being unable to provide for the unlimited wants and needs of individuals

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12
Q

Examples of each factor of production

A

Land: premises, agriculture, transport and urban cities.

Labour: employees & employers

Capital: money & finance, equipment and machinery

Entrepreneurship: Governments and companies

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13
Q

Market

A

Exchange of goods and services

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14
Q

Primary sector

A

extraction of raw materials and natural resources

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15
Q

Secondary sector

A

manufacturing and assembly process

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16
Q

Tertiary sector

A

Services that provide for individuals

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17
Q

What order does the supply chain go in?

A

Raw materials ➡️ Manufacturing ➡️ Distribution ➡️ Retailer ➡️ Consumer

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18
Q

Economic sustainability

A

The best use of scarce resources to create growth in the economy

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19
Q

As the economy grows, what happens to the state of individuals?

A

The wealthier we become

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20
Q

Environmental sustainability

A

When economic development in a country has minimal impact on the environment

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21
Q

Social sustainability

A

How an economic choice affects a community’s quality of life

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22
Q

Economy definition

A

Sustainable production and consumption of goods and services

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23
Q

Factor market definition

A

where services of the factors of production are bought by firms and sold by households

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24
Q

Product market

A

Final goods or services are offered to consumers and produced by firms

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25
Q

Expenditure definition

A

Money spent

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26
Q

How are households involved in product markets?

A

They consume the goods and services produced

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27
Q

How are households involved in factor markets?

A

They supply labour to firms for wages and salaries.

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28
Q

3 types of markets

A

Online, physical and auctions

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29
Q

Derived demand

A

When the demand for a product is linked to the demand for a related good

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30
Q

How are the product market and factor market interdependent?

A

• The skills of employees are bought by firms as labour and sold for wages

• Households then use the wages to buy goods and services from firms.

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31
Q

Economic agents

A

• Consumers
• Producers
• Businesses
• Governments
• Households

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32
Q

Free enterprise examples

A

• Sole traders
• Partnerships
• Private limited companies (LLC)
• Public limited companies (PLC)

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33
Q

Wage definition

A

Payment for labour calculated per hour

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34
Q

Debit card

A

Takes money directly from your bank account and won’t work if you don’t have enough

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35
Q

Gross pay

A

Amount of money earned by employee before any deductions

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36
Q

Efficiency

A

Being able to produce more output with the same or fewer resources

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37
Q

Specialisation

A

When individuals, firms or countries focus on producing a specific product to become more efficient

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38
Q

Division of labour definition

A

Specialisation by workers in production (can be by product or process)

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39
Q

Division of labour by product means…

A

When workers specialise in producing the final product or service

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40
Q

Division of labour by process means…

A

Workers specialise in one aspect of the production of a good or service

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41
Q

Price Mechanism

A

How changes in price reflect changes in supply and demand, allowing the market to correct itself

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42
Q

Monopoly

A

A single producer of a good or service in a market

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43
Q

Credit cards

A

allow you to borrow money from the card issuer up to a certain limit to purchase items or withdraw cash.

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44
Q

advantages of using debit card

A

• Highly convenient (widely accepted)
• Interest isn’t charged

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45
Q

disadvantages of using credit card

A

Easy to overspend due to the high interest charges

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46
Q

Incentive

A

something that entices or motivates someone to do something

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47
Q

What is economy of scale?

A

When the cost of production reduces as the production rate increases

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48
Q

Goods are

A

tangible

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49
Q

Services are

A

intangible

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50
Q

Barter system meaning

A

The exchange of goods and services without the use of money

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51
Q

Exchange meaning

A

Giving up something you have in return for something you don’t have

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52
Q

Advantages of specialisation

A

• Firms achieve economies of scale as larger output would mean lower costs

• Higher productivity as workers become more skilled and efficient

• Workers get a higher salary/ wage which increases standard of living

• GDP increases as more jobs are created

• Government revenue increases to develop country

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53
Q

Disadvantages of specialisation

A

• Costs more to train workers
• Workers lose wider skills
• Mass unemployment occurs if demand drops for the product
• Workers may get bored and reduce quality
• May cause environmental damage if surplus output goes to waste

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54
Q

Law of demand

A

As the price increases, the demand decreases and as the price decreases the demand increases.

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55
Q

Demand definition

A

When consumers are willing and able to purchase a good or service

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56
Q

Consumers consume more as the prices _______

A

decrease

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57
Q

Extension in demand

A

When the market price falls

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58
Q

Contraction in demand

A

When the market price rises

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59
Q

Inelastic product definition

A

When demand for a product is unresponsive to changes in price
(eg petrol)

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60
Q

Elastic product definition

A

When a product’s demand is highly responsive to the changes in price eg luxury goods

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61
Q

Factors of production definition

A

The inputs used in the production of goods or services to make profit

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62
Q

Labour definition

A

The human input in producing a good or service

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63
Q

Capital definition

A

Goods which are used to make products

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64
Q

3 Arguments for why the demand curve slopes downwards

A

• Substitution effect
• Income effect
• Diminishing marginal utility

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65
Q

Substitution effect

A

When consumers switch to a cheaper alternative as the price of a product increases making the product more attractive compared to similar products. This increases the demand

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66
Q

Income effect

A

When consumers have more real purchasing power as the price of a product decreases leading to an increase in quantity demanded

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67
Q

Diminishing Marginal Utility

A

As more units of a product are consumed, the level of satisfaction from each unit will decline

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68
Q

As the demand increases, the price_________

A

increases to maximise profit

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69
Q

Demand curve

A

Diagram sloping downward from left to right showing how as the price increases, demand decreases

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70
Q

Market demand meaning

A

Total demand for a good or service

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71
Q

Shift of the demand curve

A

Complete movement of the existing demand curve either outward or inwards

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72
Q

When does a shift in the demand curve occur?

A

When the demand changes whilst the price stays the same (PASIFIC)

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73
Q

Movement along the demand curve

A

When the price changes

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74
Q

Supply meaning

A

The quantity of a good or service that producers are willing and able to sell at a certain price

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75
Q

Factors that cause a shift in the demand curve

A

•Population• Advertising • Substitutes • Income of consumers • Fashion & trends • Interest rates • Complementary goods

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76
Q

How does increasing interest rates affect the demand for a good?

A

An increase in interest rates may deter consumers with credit cards to buy a product. Therefore the quantity demanded decreases shifting demand curves inwards

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77
Q

How do complementary goods affect the demand?

A

Complementary goods are bought together therefore they’re in joint demand. As the price of one good increases the demand for the other decreases shifting demand curve inwards.

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78
Q

How is an increase in price presented on a demand curve?

A

A contraction in demand

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79
Q

What does price elasticity of demand (PED) measure?

A

How responsive demand is to change in price

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80
Q

What value do inelastic products have?

A

between 0 and -1

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81
Q

PED equation

A

% change in quantity demanded / % change in price

82
Q

Unitary elastic demand

A

When the % change in demand is the same as the % change in price

83
Q

Inelastic demand

A

When demand for products are unresponsive to changes in price

84
Q

Elastic demand

A

When demand for a product is responsive to changes in price

85
Q

Revenue

A

What firms earn when they sell goods or services • Price per unit x Quantity

86
Q

As price decreases for Inelastic products, total revenue ________

A

decreases because demand stays the same

87
Q

As price decreases for elastic products, total revenue _________

A

Increase because demand increases

88
Q

Examples of inelastic products

A

addictive cigarettes, healthcare and petrol

89
Q

Examples of elastic products

A

Fizzy drinks, luxury cars and electronics

90
Q

What are the PINTSWC factors used to measure?

A

Changes in supply

91
Q

PINTSWC factors

A

• Productivity • Indirect taxes • Number of firms • Technology • Subsidies • Weather • Costs of production

92
Q

Determinants of PED

A

• Time period • Number/closeness of substitutes • % of a consumer’s income used for spending on a good • Luxury or Necessity • habitual consumption • peak and off peak demand • cost of transaction (switching)

93
Q

Transaction costs meaning

A

Cost of switching between different products (tends to have an inelastic demand)

94
Q

% of a consumer’s income used for spending on a good

A

Products that take up a high proportion of income would tend to have an elastic demand (because price increases would be significantly large)

95
Q

Habitually consumed goods effect on consumers

A

consumers become less sensitive to the price changes eg demerit goods like alcohol & cigs

96
Q

Productivity meaning

A

How efficiently factors are used to produce output • Total output / total input

97
Q

Indirect taxes meaning

A

When the government puts tax such as VAT on goods increasing the costs of firms and reducing supply

98
Q

Subsidy

A

When the government pays a company to support production increasing supply

99
Q

What happens to the supply curve as supply increases?

A

It shifts to the right (inwards)

100
Q

What happens to the demand curve as demand increases?

A

Shifts to the right (outwards)

101
Q

What curve is upwards sloping and what one is downward sloping?

A

Supply curve slopes upwards and demand curve slopes downwards

102
Q

What happens to supply as price increases

A

Supply increases to maximise profit

103
Q

A horizontal line is used to describe what type of demand curve

A

perfectly elastic

104
Q

How does a perfectly inelastic demand curve look like?

A

Vertical line

105
Q

Capacity meaning

A

The amount you are able to produce

106
Q

Stock levels meaning

A

Quantity of products available to sell

107
Q

Production lags meaning

A

Not producing as much as you are able to

108
Q

Price competition

A

When firms lower their prices to attract consumers

109
Q

Non-price competition

A

When firms use marketing, customer service or the product itself to attract consumers

110
Q

Equilibrium meaning

A

When the quantity demanded is equal to the quantity supplied

111
Q

Free market

A

Exchange of goods and services with minimal government intervention

112
Q

Mixed economy

A

Control over the exchange of goods and services is shared between producers and the government

113
Q

Impact of elastic supply on consumers

A

If the price increases, producers would be able to quickly adjust their production rate to decrease the price • Demand wouldn’t change much

114
Q

Keywords to remember for economy

A

Factors of production • basic economic problem • opportunity cost • economic/social/environment sustainability

115
Q

Keywords to remember for market

A

• factor / product market • sectors • specialisation • PED/S • movement and shift of demand curve • extension and contraction • Substitution, income, DMU effects • Incentive

116
Q

Keywords to remember for production

A

revenue • economies of scale • responsiveness • efficiency • productivity

117
Q

Signalling meaning

A

When price changes indicate where resources are needed (If prices rises, it indicates more resources are needed)

118
Q

Rationing meaning

A

Prices help to ration scarce resources. (Higher prices restricts the demand of consumers)

119
Q

Oligopoly meaning

A

Where a small number of firms control the majority share of a market

120
Q

Transmission of preferences meaning

A

Producers send information to resource suppliers about the changing demand of consumers

121
Q

The equilibrium price is also known as the

A

Market-clearing price

122
Q

Allocation of resources

A

How scarce resources are distributed among producers and allocated among consumers

123
Q

Determination of price

A

When the demand of consumers determine the price and supply of a product in a free market

124
Q

Consumer sovereignty

A

The power of consumers to influence how the market allocates resources

125
Q

Where is the surplus in relation to the equilibrium on a graph?

A

Above the equilibrium

126
Q

Features of monopolies

A

• Only one supplier
• No competition
• Suppliers control the price
• Difficult to enter market (many barriers to entry)
• Lack of efficiency

127
Q

Features of an oligopoly

A

• Firms are interdependent (work together) • Possibility of collusions • Product differentiation (they’re unique) • Some barriers to entry • not much efficient

128
Q

Barrier to entry meaning

A

Factors that prevent firms from joining a market

129
Q

Examples of barriers to entry

A

Brand loyalty • Economies of scale • Geographical barriers • Patents • Vertical integration • start up costs • marketing costs

130
Q

Brand loyalty meaning

A

When consumers are attached to existing products

131
Q

Vertical integration meaning

A

When a lack of access to suppliers prevents someone from selling their products

132
Q

Patent meaning

A

A legal barrier to copying a product

133
Q

Types of economies of scale

A

Purchasing (negotiating cheaper prices to buy in larger quantities)
• Managerial (hiring specialists to reduce costs)
• Technological (Machines increase production through automation)
• Financial (negotiating lower interest rates on loans)

134
Q

Advantages of competition

A

• Increases supply •
Reduces the price of products •

135
Q

Features of competitive markets

A

• Large number of firms • Price is set by market forces of supply and demand • Most efficient •

136
Q

Market economy

A

Where the forces of demand and supply determine the allocation of resources

137
Q

USP (Unique Selling Point) meaning

A

A feature of a product or business that makes it unique compared to other firms

138
Q

Profit

A

• Total revenue - Total costs
• Money left over after all costs have been paid

139
Q

Gross Pay equation

A

Number of hours you work x The amount you earn per hour

140
Q

Net Pay

A

Amount of money earned after deductions • Gross Pay - Deductions

141
Q

Production meaning

A

The total output of goods and services produced by a firm

142
Q

Legal monopoly

A

A producer with at least 25% market share

143
Q

Salary meaning

A

Payment for labour calculated annually

144
Q

Competition meaning

A

When different firms are trying to sell a similar product to consumers

145
Q

What is a loss?

A

When total revenue is less than total cost

146
Q

Total Cost (TC)

A

• All costs added together • Variable costs (VC) + Fixed costs (FC)

147
Q

Average cost (AC)

A

• Unit cost of production • Total costs / Total output

148
Q

Average Revenue

A

• Amount of money earned from each sale made • Total revenue / Total output

149
Q

What are Fixed Costs (FC)?

A

• Costs that do not change with output • Examples: Rent, interest, Wages/salaries

150
Q

What are Variable Costs (VC)?

A

• Costs that change directly with the amount of output you produce (Vc x output)

• Examples: Cost of raw materials and hiring workers • Packaging & Delivery costs

151
Q

Impact of Fixed Costs

A

They are spread out over the units produced • This means that cost per unit decreases as production increases (economy of scale)

152
Q

Labour market definition

A

When workers sell their labour and firms buy their labour (exchange)

153
Q

Determination of wages

A

Interaction of supply of labour and demand for labour

154
Q

What factors causes a change in labour markets?

A

• Net migrations • An ageing population • Self-employment rise • Decline in trade unions • Rise in temporary jobs

155
Q

Public sector meaning

A

Organisations owned by the government that provide essential services through funds from tax • Eg schools and hospitals

156
Q

Private sector meaning

A

Organisations owned by individuals that aim to generate profit through revenue and investments • Eg Apple (PLC) and Google (LLC)

157
Q

Sole trader meaning

A

Organisation owned by an individual and is personally liable for all business debts • Eg cleaners and cooks

158
Q

Partnership meaning

A

When 2 or more individuals own an organisation and share the profits / liability for debts • Eg: PwC, Medical firms, Law firms

159
Q

Private Limited Company meaning (LLC)

A

Businesses owned by shareholders who doesn’t sell its shares to the public • Has limited liability • Eg Google and YouTube

160
Q

Shares meaning

A

Unit of ownership by a company in a market

161
Q

Public Limited Company meaning (PLC)

A

Company whose shares are available to buy and sell in public (on the stock market) • Liability is limited • Eg Apple and Microsoft

162
Q

What is the effect of decreasing the price in a competitive market?

A

It could drive out competitors or reduce supply to clear a surplus

163
Q

Examples of deductions

A

• Taxes • National Insurance • Pension contributions • Student loan repayments

164
Q

Pension meaning

A

A fixed amount paid to people who have retired

165
Q

Trade Union meaning

A

An organisation of workers active on behalf of its workers • Helps increase wages and improve working conditions • Eg TFL strikes

166
Q

Factors affecting supply of labour (5)

A

• Wage rate
• The higher the wage the more people are willing to work

• Non-monetary factors
• Eg better working conditions and promotions would make it increase

• Other monetary payments
• Eg overtime pay will increase supply

• Barriers to entry
• Eg qualification requirements

• Size of working population
• Eg an ageing population would have a low supply

167
Q

Factors affecting demand for labour (6)

A

• Demand for products
• Higher demand would increase demand for labour

• Wage rates
• Higher wages increase the COP and decreases demand for workers

• Real wages
• If it falls labour may replace capital

• Productivity of labour
• Rise in productivity means higher wages can be paid

• Profit of firms
• Increase in profits would allow expansion for labour

• State of the economy
• Growing economy would require more labour

168
Q

Labour markets are made up of smaller interacting ones for:

A

• Different qualifications • Different skills • Different geographical locations

169
Q

What is an MNC?

A

Multi National Corporation • A firm that has its head office in one country but operates in other countries

170
Q

Collective bargaining

A

When trade unions negotiate with employers on behalf of its members to set the wage rate

171
Q

Inflation meaning

A

A rise in the price of goods and services

172
Q

Real wage meaning

A

How inflation impacts the amount of goods and services you are able to buy
(Nominal wage / Price Index)

173
Q

What is Price Index?

A

A measure of the price levels

174
Q

Nominal wage meaning

A

The amount of money workers are paid

175
Q

YED meaning

A

How responsive quantity demanded for a good is to a change in consumer income

176
Q

YED equation

A

% change in demand / % change in income

177
Q

Medium of exchange meaning

A

Something that is widely accepted for transactions eg money

178
Q

Disadvantages of the barter system

A

• No consumer protection • No legal certification

179
Q

Flow of capital meaning

A

The movement of money during investment and trade

180
Q

Geographical immobility

A

When workers cannot easily move to another country for a job (eg lack of affordable housing or language barriers)

181
Q

Occupational immobility meaning

A

When workers find it difficult to move across jobs due to factors such as: qualifications, skills and training

182
Q

Types of labour markets

A

• Local (within a short distance of worker’s home)
• National (Covers whole of UK)
• International (Covers areas around the world)

183
Q

What do retailers tend to do at busy times of the year?

A

They employ temporary workers to provide for the increased demand eg in Christmas

184
Q

Factors that affect wages

A

• Training
• Age
• Skills
• Trade unions
• Experience
• Derived demand

185
Q

Role of the labour market

A

• Enables workers who are willing and able to sell their labour to meet employers who are willing and able to offer them a job

• It determines the wage rate/salary for a job

186
Q

Reasons for lack of labour mobility

A

• Occupational immobility
• Geographical immobility
• Personal factors (eg family ties)

187
Q

Advantages of an increase in production

A

• Increase in employment may have taken place
• Increase in profits
• Gaining a greater market share
• Gaining larger economies of scale

188
Q

Disadvantages of an increase in production

A

• Increase may be a result of machines replacing workers
• Workers replaced would have a lower standard of living
• Could lead to environmental problems

189
Q

Importance of increased productivity

A

• Increased economies of scale as average costs decrease
• This helps firms become more competitive

• Increased profits
• This leads to better investments to attract specialists

• Increased total output of economy
• Inflicts greater economic growth and GDP increases

190
Q

Disadvantage of increased productivity

A

• Automation would mean workers become unemployed

191
Q

Why does money act as a medium of exchange?

A

It’s widely accepted for the buying and selling of products

192
Q

Financial sector

A

Section of the economy made up of firms that provide financial services to customers

193
Q

What are the roles of the financial sector?

A

• Involves the lending and borrowing of money eg through banks and building societies
• Banks and building societies enable savers to provide for borrowers
• This allows for the supply of money (savers) to equal demand for money (borrowers)

194
Q

What are the roles of the central bank?

A

• Issue bank notes and control the supply of money (quantitative easing)
• Control monetary by setting the bank rate
• Provide financial stability by setting the interest rate to keep inflation down
• Acts as a bank for commercial banks and the government

195
Q

Name of central bank in England

A

Bank of England

196
Q

What are the roles of commercial banks?

A

• They take deposits from customers and turn them into assets for the bank

• They charge interest higher than the bank rate (to cover their expenses)

• Make payments on behalf of others

• Issue loans to individuals and firms

197
Q

Examples of commercial banks

A

• Barclays
• HSBC
• Metro

198
Q

Building society definition

A

Mutual financial organisations that are owned by their members

199
Q

Building societies characteristics

A

• Mutual organisations
• Provide savings and mortgages
• Limited as to how much money can be borrowed

200
Q

Insurance company

A

A financial institution that provides compensation for losses in return for an agreed payment

GCSEs (17 decks)

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