Unit 1

Question 1

GDP

Answer 1

Total value of everything produced in an economy in a given period of time

Question 2

GDP per capita

Answer 2

GDP/population

Question 3

Disposable income

Answer 3

Income available after paying taxes and receiving transfer payments from government

Question 4

90/10 ratio

Answer 4

Average income of richest 10% / average income of poorest 10%

Question 5

Technological progress

Answer 5

Change in technology that reduces the amount of resources required to produce a given amount of output

Question 6

Industrial revolution

Answer 6

Wave of technological advances and organisational changes in Britain in 18C which transformed an Agrarian and craft based society into a commercial and industrial economy

Question 7

GDP growth rate =

Answer 7

Change in income / original income

Question 8

PPP

Answer 8

Statistical correction allowing comparisons of the amount of goods people can buy in different countries that have different currencies

Question 9

Real GDP

Answer 9

GDP Taking inflation into account = sum of price of good in base year X q in new year

Question 10

Nominal GDP

Answer 10

Sum of all goods p X q

Question 11

Capitalism

Answer 11

Economic system where main institutions are private property, firms and markets

Question 12

Institutions

Answer 12

Laws and social customs governing the production and distribution of goods and services

Question 13

Economic system

Answer 13

Way of organising the production and distribution of goods and services in an entire economy

Question 14

Capitalist revolution

Answer 14

Rapid improvements in technology combined with the emergence of a new economic system that transformed the way people interact in producing their livelihoods

Question 15

Democracy

Answer 15

Political system that ideally gives equal political power to all citizens

Question 16

Absolute advantage

Answer 16

When a country can use less inputs to produce a good than another country

Question 17

Comparative advantage

Answer 17

When a country can produce a good at a lower opportunity cost than another country

Question 18

Causality

Answer 18

A direction from cause to effect - a change in one variable produces a change in another

Question 19

Developmental state

Answer 19

A government that takes a leading role in promoting the process of economic development through investment, subsidies, education and other public policies

Question 20

Central planning

Answer 20

Economy where economic decisions are taken by government

Question 21

Dynamic economy

Answer 21

An economy bringing sustained growth in living standards

Question 22

why is disposable income thought to be a good measure of living standards

Answer 22

because it is the max amount of food, housing, clothes and other g and s that a person can buy without having to borrow

Question 23

what does disposable income leave out

Answer 23

quality of social and physical environment
free time to relax or socialise
goods and services we do not buy eg healthcare and education

Question 24

when do people report low wellbeing

Answer 24

if they find they earn less than others in their group

Question 25

how can GDP per capita be a better measure of wellbeing than disposable income

Answer 25

because GDP includes g and s produced by the gov eg helathcare and education which are not included in disposable income

Question 26

what does it mean if GDP is the same from one year to the next

Answer 26

there may have been a change in the composition of output but overall output of g and s has not changed so real GDP is unchanged and growth rate in real terms=0

Question 27

waht deos a steeper line on ratio scale mean?

Answer 27

faster growth rate

Question 28

technology

Answer 28

a process that takes a set of materials and other inputs and creates an output

Question 29

why is tech progress significant for increased standards of living

Answer 29

because it reduces the amount of work-time it takes to produce things we need

Question 30

what are global and local resource exhaustion a result from

Answer 30

the expansion of the economy and the organisation of the economy

Question 31

whats the relationship between the economy and the environment

Answer 31

use natural resources in production which may affect the environment and its capacity to support future production;. and the permanent tech revolution may be the solution to today’s enviromental problems

Question 32

capital goods

Answer 32

the equipment, buildings raw materials and other inouts used in producing G and S

Question 33

private property

Answer 33

one can enjoy one’s possessions in ways that you choose, exclude others from their use, and dispose of them by gift or sale to others who then become their owners.

Question 34

markets

Answer 34

a means of transferring goods and services from one person to another

Question 35

3 aspects of markets

Answer 35

they are reciprocated, they are voluntary and there is competition

Question 36

characteristics of firms

Answer 36

one of more individual own a set of capital goods that are used in production
pay wages and salaries to employees
direct employees in production of G and S
sell g and s in markets with intention of making a profit
the goods and services are property of the owners

Question 37

why are employee-owned cooperatives not firms

Answer 37

because the owners are not private individuals who own assets of the firm and employ others to work

Question 38

why is private property essential for markets to work

Answer 38

because buyers will not want to pay for goods and services unless they have the right to own them

Question 39

ownership

Answer 39

the right to use and exclude others from the use of something and the right to sell that thing on

Question 40

changes that helped the emergence of capitalism

Answer 40

technology as firms competing with each other adapt and develop new and more productive technologies
specialisation - as become better at producing when focus on limited range of activities

Question 41

when is capitalism less dynamic

Answer 41

when private property is less secure, markets are not competitive and firms are owned by people because of their connections

Question 42

monopoly

Answer 42

firms with only one seller - makes markets less competitive

Question 43

why is private property important for tech change

Answer 43

firm’s won’t invest if others can benefit from their investment
increases productivity of labour because people have incentives to work harder as they know they are protected by law

Question 44

how can markets encourage innovation

Answer 44

firms can harvest economic rents so by innovating a firm is more likely to get profits or will get pushed out of the market by the process of creative destruction

Question 45

firms vs family production

Answer 45

firms have more room for expansion so can specialise and benefit from EOS hence in LR can sell G and S for cheaper so living standards will improve. firms can hire additional workers and attract funds to finance purchase of k goods to expand production so can produce a large variety of goods and services at lower cost

Question 46

intellectual property examples

Answer 46

patents, copyrights trademarks

Question 47

advantages of intellectual property

Answer 47

development of new goods due to protection, encourages I and innovation, enhances market entry and firm creation

Question 48

disadvantages of intellectual property

Answer 48

may stifle competition by others as the patent needs to be different enough to something that already exists so may be barrier to firms entering the market and thus creates a monopoly - prices are higher than they should be as firms can restrict output