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AS Economics > 1.1.1 + 1.1.2 + 1.1.3 + 1.1.4 PPFs,the economic problem, Economics > Flashcards

1.1.1 + 1.1.2 + 1.1.3 + 1.1.4 PPFs,the economic problem, Economics Flashcards

1
Q

why is economics a social science?

A

it studies human behaviour and decision making within and beetween markets

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2
Q

why are models and theories developed?

A
  • theories: helps to explain the many choices
  • models: help predict the impact of economic change
  • built on assumptions
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3
Q

what is the need to make assumptions?

(prior conditions made before a macro/micro analysis is built)

A
  • the asumptions help to simplify analysis, however can be critised for not being realistic simplification of economic idea
  • simplification of an economic relationship
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4
Q

what is ceteris paribus?

A

isolates the relationship between two variables, by assuming that all influencing factors are held constant

an assumption

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5
Q

assumptions

EXAM TIP

A
  1. write at least one assumption during analysis
  2. later on critique and evaluate your analysis later by questioning this assumption

eg: an increase in goods……assuming they rae normal goods, however……..

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6
Q

why are models only built of data and assumptions?

A

economists cannot conduct scientific experiments

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7
Q

why is it difficlut for economists to run experiments?

A

the factors are variously changing

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8
Q

what is the economic problem?

A

the problem of scarcity:
* unlimted wants as a society
* finite resources

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9
Q

what are examples of finite resources?

A

limited
* workers
* machines
* acres of land
* reserves of oil

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10
Q

describe non-renewable resources:

A
  • finite in supply
  • rate of extraction is determined by current market price. Higher prices= more profit= inrease in rate of rxtracttion since higher profits

coal, oil, gas

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11
Q

describe renewable resources

A
  • replaceable (rate of extraction/consumption < rate of resource renewal)
  • exhausatable if not manged properly
  • tragedy of the commons & unsusuainable use of common pool resources

solar energy, tidal power,

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12
Q

who are the three main economic agents?

A
  • conusmers
  • goverment
  • producers
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13
Q

What is opportunity cost?

A
  • the unavoidable trade offs in the prescence of scarcity
  • the value of the next best alternative

what you sacrifice

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14
Q

what is an economy?

A

the goods and services produced in an area

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15
Q

what is the importance of opportunity costs on the economic agents?

A
  • consumers: decide what to sepnd their incoome on
  • producers: decide how and what to produce goods
  • goverment: decide which policies to choose
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16
Q

what are the 4 factors of production?

A
  • land :natural resources
  • capital : things used to make goods and services
  • labour : work done by humans during production
  • enterprise: wilingness of people to make risks and take profits
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17
Q

what is automation?

A

uses capital and machinary /new technology to replace or enhance human labour

replacing labour= capital labour substitiution

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18
Q

what is investment?

A

the purchase of capital

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19
Q

what is production possibility frontier?

A

shows the maximum potential output combinations of two goods or serices that an economy can achieve when all it’s resources are fully and efficently employed

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20
Q

what is economic growth and how it is caused?

A

increase in production of goods and services
due to:
* increase in quantity of factors of production
* increase in quality of facrors of production

21
Q

Describe this Production possibility Frontier

A
22
Q

Show economic growth and negative economic growth on a PPF

A

Economic growth : arc shift Outwards
Negative economic growth : arc shift inwards

23
Q

why is it impossible for economist to run scientific experiments?

A

there are too many variables to isolate

24
Q

what needs to happen for an economy to produce a currebtly unobtainable comnination of goods/servives in the future?

A
  • quality and quanitity of factors of production needs to increase
  • increase in productivity
  • improvement in technology
25
Q

what are consumer goods?

A

goods that are used to satisfy people’s wants and needs

26
Q

what are capital goods?

A

goods which are used to produce othergoods and services

27
Q

what does it mean for an economy to be at any point on a PPF?

A

an efficent allocation of resources, since non are being wasted or under utilised

28
Q

Why might the graph shift from point B to C?

A

An increase in disposable income (wages)

29
Q

what happens if there is an increase in capital goods?

A

there will be a long term incresae in the productive potential of the economy

30
Q

why might a ppf shift inward?

A
  • war
  • conflict
  • net migration of people out of a country
  • resource depletion (because of climate change)
31
Q

what are positive economic statements?

A
  • can be tested as true or false
  • objective statements
  • “will” or facts

in Q: “it is possible to test whether……”

32
Q

what are normative economic statements?

A
  • express opinion and connot be tested true/false
  • subjective statements
  • “should”, “fair”, “unfair”, are value judgements
  • always contain a value judgement

quote specific words when answering Q

33
Q

what are value judgements?

A

a view of rightness or wrongness of something, based on a perosnal view

34
Q

where are normative and postive statements used?

A
  • normative : goverments make value judgment on economic issues
  • postivive analysis is done to help them make decisions
35
Q

define normative staments

A

subjective statements that cannot be tested as true/false

36
Q

define positive statments

A

objective statments that can be tested as true/false

37
Q

define value judgments

A

a view of the rightnessor wrongness of something, based on a personal view

38
Q

define capital goods

A

help to aid production of consumer goods in the future

39
Q

define factors of production

A

the resources used to produce goods and services

land, labour, capital, enterprise

40
Q

define opprtunity cost

A

the cost of any choice in terms of the next best forgone alternative

41
Q

define production possibility frontier

A

shows the maxiumum potential output of a combination of two goods and services an economy can achieve when all of it’s resources are fully and efficently employed

42
Q

define consumer goods

A

goods used to satisfy consumer wants and needs

43
Q

define ceteris paribus

A

a principle where the relationship between two variables is isolated, assuming that all other factors are held constant

44
Q

define the economic problem

A

the problem of scarcity; wants and needs are unlimted but resources are finite so choices must be made

45
Q

define renewable resources

A

resources which can be replenished; so the stock of resources can be maintained over a period of time

46
Q

define non renewable resources

A

resources which cannot be readily replenished or replaced at a level equal to consumption; the stock level decreases over time as they are consumed

47
Q

define maximum productive potential

A

the amount of output an economy could produce if all of its resources were fully and efficently employed

48
Q

define economic growth

A

an increase in the productive potential of a country - shown by an outward shift of the PPF

AS Economics (24 decks)

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