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A Level Economics > 4.1.1 Economic Methodology And The Economic Problem > Flashcards

4.1.1 Economic Methodology And The Economic Problem Flashcards

1
Q

Social science

A

Study societies and the human interactions within those societies
Human interactions are complex and are influenced by many variables

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2
Q

How do economists understand certain interactions

A

Economists build models
All models make a range of assumptions

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3
Q

Difference between positive and normative statement

A

A positive statement is one that can establish hypotheses and empirically tested. In contrasts a normative statement is instead based on opinion and subjective values

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4
Q

Examples of positive economic statements

A

Unemployment rate in India falling
Increasing the minimum wage last year in the UK has resulted in improvements to wage inequality
Prices of oil have dramatically risen

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5
Q

What are normative economic statements often an example of

A

Basis of manifestos of political parties

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6
Q

Examples of normative economic statements include

A

Every economy should aim to provide free healthcare for citizens
Corporation taxes in an economy should be higher than personal income taxes
The best way to deal with crime is to employ more police

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7
Q

Value judgements

A

The belief of individuals and societies about what is right ad wrong

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8
Q

What do value judgements do

A

Influence governments choices with regards to the economic policies they choose to adopt and send money on

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9
Q

What is individual decision-making influenced by

A

Positive outcomes and the morality of choices

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10
Q

What are positive outcomes focussed on

A

Self and not ‘the benefit of society’

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11
Q

Moral judgements

A

Normative concept, the right things means different things to different people

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12
Q

What do consumers have different moral judgements on

A

Equity and equality

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13
Q

Equity

A

Concerned with the idea of fairness

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14
Q

Examples on how moral judgement is different for government policies

A

Some countries believe that it is fair for all citizens to be able to access healthcare, irrespective of their ability to pay, where as other countries believe that no pay, no access is fair

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15
Q

Equality

A

Concerned with everyone being equal and having equal

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16
Q

What type of concept is equality

A

Normative

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17
Q

Central purpose of economic activity

A

The production of goods and services to satisfy needs and wants

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18
Q

Needs

A

Are essential for survival eg. Food and shelter

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19
Q

Wants

A

The desires for goods and services that are not essential eg. Electronics

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20
Q

What is wrong with the demand for needs and wants

A

The demand for needs and wants is infinite while the supply of resources needed to produce them is finite

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21
Q

Finite

A

There is a limited amount available and it will at some point run out

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22
Q

Goods

A

Physical products such as bicycles or T-shirts

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23
Q

Services

A

Non-physical items such as hairdressing, tourism or manicures

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24
Q

What is the ultimate goal of firms

A

To create products that meet the needs and preferences of customers and provide value to them

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25
Q

What happens to businesses when they meet customer needs

A

Business can build customer loyalty, increase brand awareness and generate revenue

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26
Q

Third purpose of business activity

A

To add value to products and services

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27
Q

Adding value

A

Is the difference between the price that is charged to the customer and the cost of inputs required to Crete the product or service

28
Q

What can value added features do

A

Differentiate products from competitors, create a unique selling point and increase customer satisfaction

29
Q

Unique selling point

A

The elements that make one business products better than those of competitors

30
Q

Differentiate

A

Making a product different from other similar products through the use of unique features and branding

31
Q

Example of how differentiated product can create a competitive advantage for businesses

A

A product that is easier to use, has a better design or is of higher quality than competitors

32
Q

Scarcity

A

The demand for a good or service is greater than the availability of a good or service

33
Q

3 important economic questions

A

What to produce?
How to produce?
Who is to benefit?

34
Q

What to produc

A

As resources are limited in supply, decisions carry an opportunity cost
What should be produced a better rail service or more public hospitals

35
Q

How to produce it

A

Would it be better for the economy to have labour-intensive production so that more people are employed, or should goods/services be produced using machinery

36
Q

Price mechanism

A

The interaction of demand and supply in a free market and the means by which scarce resources are allocated between competing wants and needs

37
Q

3 main economic systems

A

Free market, a mixed economy, a planned economy

38
Q

Mixed economy

A

A blend of free market and planned economy as individual, firms ands the government own factors of production and distribute goods and services

39
Q

Planned economy

A

An economy in which all the resources are owned by state and the government controls the distribution of goods/services

40
Q

What and how to produce?
For whom?
Free market system

A

What-demand and supply
How-most efficient profitable way
For- those who can ford it

41
Q

What/hows to produce?
For whom?
Mixed system

A

What-demand, supply, the government
How- some efficiency but also focus on welfare
For- those who can afford it, plus some provision to those who cannot afford it

42
Q

hat/how to produce?
For whom?
Planned system

A

What-the government
How- ensure everyone has a job
For whom- everyone

43
Q

Factors of production

A

Land, labour, capital and enterprise

44
Q

Land

A

Non man-made natural resources available for production

45
Q

Labour

A

The human input into the production process

46
Q

Capital

A

Any man-made resource that is used to produce goods and services

47
Q

Enterprise

A

Involves taking risks in setting up or running a firm

48
Q

Free market economic system

A

A market economy with no government intervention

49
Q

Factors market

A

A market where factor of production and bought and sold

50
Q

Sustainability

A

Meeting the needs of current generation without compromising the needs of future generations

51
Q

Problem with overconsumption

A

Current generations over consume and produce, resulting in resources becoming scarce which means they are being destroyed for future generations

52
Q

Factors of production

A

Land, labour, capital, enterprise

53
Q

Basic economic problem

A

Resources are scarce

54
Q

How scarcity affects consumers

A

In a free market scarcity has a direct influence on prices
The scarcer the resource r product, the higher the price consumers will pay

55
Q

How scarcity affects producers

A

Producers selling products made from scarce resources will find their costs of production are higher than if they were selling products made from more abundant resources

56
Q

How scarcity can affect workers

A

Workers may want a more comfortable and safer working environment but their employers may not have the resources to create it

57
Q

How scarcity affects the government

A

Governments have to decide if they will provide certain goods/services or if they will allow private firms to provide them instead
Their decision influences the allocation of resources in society

58
Q

Opportunity cost

A

the loss of the next best alternative when making a decision

59
Q

Example of opportunity cost

A

When a consumer chooses to purchase a new phone, they may be unable to purchase new jeans. The jeans represent the loss of the next best alternative (the opportunity cost)

60
Q

Production possibility curve

A

is an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production to produce only two goods/services

61
Q

Allocative efficiency

A

Makes the best possible use of scarce resources to produce the combinations of goods and services that are optimal for society, thus minimising resource waste

62
Q

How can you use production possibility curve to show economic growth or decline

A

Outward shift of entire curve- economic growth
Inward shift- economic decline

63
Q

Example of how a factor of production can be improved

A

the impact of training and education on labour. An educated workforce is a more productive workforce and the production possibilities increase

64
Q

When does economic decline occur

A

when there is any impact on an economy that reduces the quantity or quality of the available factors of production

65
Q

Example of economic decline

A

Japanese tsunami of 2011 devastated the production possibilities of Japan for many years. It shifted their PPC inward, resulting in economic decline

A Level Economics (3 decks)

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