Booklet 1 - Micro

Question 1

Definition - Economics

Answer 1

The allocation of scarce resources

Question 2

Definition - Ceteris Paribus

Answer 2

all other things are equal

Question 3

Definition - Utility

Answer 3

the benefit that someone gains

Question 4

Definition - Rational utility maximiser

Answer 4

acts rationally to maximise there utility

Question 5

Definition - positive statements

Answer 5

a statement that can be tested

Question 6

Definition - normative statements

Answer 6

a statement which is an opinion

Question 7

Definition - equitable

Answer 7

something that is deemed to be fair

Question 8

Definition - cost benefit principle

Answer 8

you weigh up the cost and the benefit of a situation and follow the best course of action

Question 9

Why don’t people always maximise there utility

Answer 9

lack of information, gut decisions, mental health, substance abuse, other peoples utility, prioritizing the short term benefits

Question 10

Definition - scarcity

Answer 10

not enough of it to meet needs and wants

Question 11

Definition - Basic economic problem

Answer 11

there are infinite wants but limited resources

Question 12

Definition - free market economy

Answer 12

People willing to pay the most, get the resources

Question 13

Definition - mixed economy

Answer 13

Both markets and the Government allocate resources

Question 14

Definition - planned economy

Answer 14

Government decides what is produced

Question 15

Definition - Land (as a factor of production)

Answer 15

any natural resource - iron and forests

Question 16

Definition - labour (as a factor of production)

Answer 16

physical or mental effort of workers

Question 17

Definition - capital (as a factor of production)

Answer 17

any man made aid to production - machinery

Question 18

Definition - enterprise (as a factor of production)

Answer 18

someone thats takes a risk bringing other factors of production together

Question 19

Definition - purpose of economic activity

Answer 19

to produce goods and services to satisfy all needs and wants

Question 20

Definition - trade off

Answer 20

choosing between 2 variables

Question 21

Definition - opportunity cost

Answer 21

the benefit given up from the next best alternative

Question 22

What are the 4 types of output

Answer 22

services, capital goods, non-durable consumer goods, durable consumer goods

Question 23

Definition - production

Answer 23

the actual amount of output produced

Question 24

Definition - productivity

Answer 24

the amount of output you get for the given level of inputs

Question 25

Definition - total factor productivity

Answer 25

average productivity of all factors of production

Question 26

productivity equation

Answer 26

productivity = total output / number of units

Question 27

average cost equation

Answer 27

Average cost = total cost / number of units

Question 28

how can productivity be increased

Answer 28

encouraging training and innovation

Question 29

What are the advantages of higher productivity

Answer 29

lower average costs, improved competitiveness in markets, higher profits, higher wages, economic growth

Question 30

Definition - productive efficiency

Answer 30

the maximum amount of output is produced with the amount of input to the lowest average cost

Question 31

Definition - technical efficiency

Answer 31

the maximum amount of output is produced with the amount of input

Question 31

Definition - allocative efficiency

Answer 31

output are distributed that maximise consumer welfare

Question 31

Definition - pareto efficiency

Answer 31

a situation where no one can be better off without some else being made worse off

Question 32

Definition - statically efficient

Answer 32

is efficient at any one time

Question 33

Definition - dynamically efficient

Answer 33

gets more efficient over time

Question 34

Definition - X-inefficiency

Answer 34

uncompetitive markets don't need low costs and can increase prices

Question 35

Definition - division of labour

Answer 35

Production is divided into different stages

Question 36

Definition - specialisation

Answer 36

when people focus on the thing they do best

Question 37

what are the drawbacks with specialisation and the division of labour

Answer 37

- demotivated, lower productivity, more likely to quit - forget how to do other things - workers are less flexible - may be a risk of unemployment if job disappears ( mechanised)