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Economics A level > Micro > Flashcards

Micro Flashcards

1
Q

Microeconomics

A

Economic behaviour in the individual markets that make up the economy
Included individual consumers, markets and industries e.g. NHS, housing, food

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2
Q

Macroeconomics

A 
Explains how whole economy works; looks at aggregates rather than individual aspects 
Measuring economy as a whole-
GDP
Inflation 
Taxation 
Unemployment
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3
Q

Economics is a social science

A

Relationships of individuals within a society

E.g. Customers buy firms supply in the economic market

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4
Q

Economics

A

Study of social behaviour guiding in the allocation of scarce resources to meet needs and wants of the individual members of a given society
Study of scarcity

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5
Q

Needs

A

Limited, necessary

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6
Q

Wants

A

Limited supply

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7
Q

Scarcity

A

When wants and needs are not satisfied therefore a choice has to be made
Economics look at how resources are allocated in a certain way
So it’s a study of choices

Ex of scarcity
NHS lacking funding because of government making choices

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8
Q

Choices

A

When resources are scarce choices have to be made

Criteria of choices: maximise economic welfare

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9
Q

Goods

A

Tangible products

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10
Q

Economic activity

A

Central purpose of economic activity is production of goods and services to satisfy needs and wants therefore improve/maximise economic welfare

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11
Q

Production

A

Conversion of raw materials into products

Process of converting inputs into outputs

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12
Q

Factors of production

A

C apital - money raised to operate business

E nterprise - risk takers who organise other products; thinking, ideas

L and - where business is based; natural resources extracted from environment

L abour - the human input: skills, abilities

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13
Q

Services

A

Intangible

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14
Q

Free goods

A

Goods that are freely available at no cost and availability is unlimited

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15
Q

Economic goods

A

Goods which must be produced using finite resources which are in limited supply

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16
Q

Market failure

A

When economic welfare isn’t maximised

Goods are either over or under produced

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17
Q

Economic welfare

A

Economic wellbeing of an individual/group within a society/economy

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18
Q

Fundamental economic problem

A

How to make the best decisions about the allocation of scarce resources
In order to improve and maximise economic wellbeing

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19
Q

Opportunity cost

A

Next best alternative

20
Q

Rational decision making

A

The assumption that people choose the best option based on their own self interest or which maximises benefit to them

21
Q

Countering rational decision making

A 
Making irrational choices when buying things
When in a hurry
On impulse
Addictions
Designer items
Short and long term decisions
Long term - retirement
22
Q

Production possibility curve

A

Shows different possible combinations of 2 goods that can be produced using available resources
Clearly illustrates importance of opportunity cost
Full employment of available resources
All points on curve are points of maximum productive efficiency

23
Q

Economic retraction

A

Recession

24
Q

Inside production possibility frontier curve

A

This point would shown that the economy (productivity) is inefficient because there is an underutilisation of resources

25
Q

Productive efficiency

A

Measure of efficiency
Occurs when output is maximised from available inputs
For economy as a whole occurs when it’s impossible to produce more of one good without producing less of the other
For individual firms occurs when available total costs of production are minimised

26
Q

Allocative efficiency

A

When economic resources are used to produce goods and services that best match people’s preferences
You can see allocative efficiency on a production possibility diagram but not how it’s maximised

27
Q

Positive statement

A

Objective statements omitting any opinion that deal with matters of fact
Based on theory not emotion, often expressed in the form of a hypothesis that can be analysed and evaluated
Either correct or incorrect
Question how things actually are: based on solid theory which is based on numbers which is based on the economic principles

28
Q

Normative statements

A

Subjective; often without a basis in fact or theory

Based on your opinion and values

29
Q

Allocative mechanism

A

Economic systems are the institutional arrangements employed to ensure scarce resources are used effectively to maximise satisfaction

30
Q

Planned/ command economy

A

Government decides everything

E.g. Cuba, china,

31
Q

Market/ price led economy

A

(Doesn’t actually exist)
Private individuals and companies make the majority of decisions about what goods and services are produced
(If supply is meeting demand then everything is fine)
Often referred to as free trade: the price people are prepared to pay determines what suppliers are prepared to supply
Government involvement is minimal

32
Q

Mixed economy

A

Closer to free end of spectrum
Private and individual businesses provide some goods and services while the government will organise the provision of others through the public sector

33
Q

Law of demand

A

Quantity or goods/ services that consumers are willing and able to buy at a given time period

34
Q

Effective demand

Must be able and willing to pay

A

Effective because it’s only when consumers want to buy (backed up by ability to pay) does demand actually have an impact on the market
Consumers must have sufficient purchasing power to have any effect on the allocation of scarce resources

35
Q

Ceteris paribus assumption

A

Other factors remain the same but there is an inverse relationship between price of goods and demand
As prices rise there will be a contraction of demand
As prices fall there will be an expansion in demand

36
Q

Movement

A

When PRICE of good changes

37
Q

Shift in demand curve

A

When any other factor OTHER THAN price of the good itself changes

38
Q

Shift to right

A

Increase in demand

39
Q

Shift to left

A

Decrease in demand

40
Q

Conditions of demand

A 
P opulation
A dvertising 
S ubstitutes
I  ncome
F ashion/ trends
I  nterest rates
C omplementary goods
41
Q

Expansion in demand

A

Prices fall

42
Q

Contraction in demand

A

Prices rise

43
Q

Substitutes

A

Goods in competitive demand and act as replacements for another product

44
Q

Joint/ complementary demand

A

When you need one product in conjunction with another product
E.g. DVD players & DVD’s, printers & ink cartridges

45
Q

Competitive demand

A

As price increases so does demand

46
Q

Normal goods

A

Items where when income increases so does demand

E.g. Nike & adidas- goods you want to buy

47
Q

Inferior goods

A

Items where increase in income there’s a decrease in demand

Economics A level (4 decks)

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