Chapter 1

Question 1

What is ceteris paribus

Answer 1

All other things being equal

Question 2

What is economics’ main objective

Answer 2

To meet the needs and wants of society

Question 3

What is a normative statement

Answer 3

They’re subjective statements . They’re value judgements and based on opinion

Question 4

Positive statement

Answer 4

They’re objective statements that can be tested , they’re based on evidence

Question 5

What are the four factors of production

Answer 5

Land
Labour
Capital
Enterprise

Question 6

What is a production possibility frontier (PPF)

Answer 6

It is the maximum combination of output assuming all resources are utilised

Question 7

How does a PPF shift to the right

Answer 7

If you acquire more FOP

Question 8

What is opportunity cost

Answer 8

If you want to produce more of one product then you must give up some of the other product

Question 9

What is absolute advantage

Answer 9

Being able to produce more of something than another country (assuming both have the same amount of resources)

Question 10

What is comparative advantage

Answer 10

Being able to produce something at a much lower opportunity cost than another country . (Again assuming all FOP are equal )

Question 11

How do you find opportunity cost

Answer 11

It’s the smallest number

Question 12

What are the functions of money

Answer 12

Medium of exchange
Measure of value
Store of value
Method of settling debts

Question 13

What is consumer price

Answer 13

Difference between the market price and the price you’re willing to pay

Question 14

Where does consumer surplus lay on a supply and demand curve

Answer 14

It lays above the equilibrium on the left hand side

Question 15

What is consumer surplus

Answer 15

Difference between the price the consumer is willing to pay and the market price

Question 16

What is marginal utility

Answer 16

Additional satisfaction a consumer gains from consuming one more unit of a good or service

Question 17

What is diminishing returns

Answer 17

Reduced returns the more you do economic activity

Question 18

What is specialisation

Answer 18

Where individuals , firms or countries concentrate on producing a narrow range of goods and services

Question 19

Advantages of specialisation

Answer 19

Increases output
Allows a person to improve
Less mistakes 
Jobs get done quicker
Motivates

Question 20

Disadvantages of specialisation

Answer 20

Fewer replacements
Takes time to train
Demotivates as doing the same job
Person isn’t multi skilled

Question 21

What is division of labour

Answer 21

Where a firm specialises in producing a good or service and the production process is broken down in to separate tasks . E.g. F1 pit stop

Question 22

What is a subsidiy

Answer 22

Amount of money given directly to firms by the government to encourage production and consumption

Question 23

Where on a supply and demand diagram is producer subsidy’s

Answer 23

Above the equilibrium to the left

Question 24

Where about is the consumer subsidy

Answer 24

Below equilibrium to the left

Question 25

Reasons for subsidies

Answer 25

Helps businesses survive Reduces prices Good for political votes Benefits poor people

Question 26

Reasons against subsidies

Answer 26

Makes it harder for small businesses to compete | There are loop holes , where people can exploit the system and take the money

Question 27

What is a flat tax

Answer 27

Putting specific tax (e.g. £1 per product ) on a unit of goods e.g. cigarettes , alcohol , sugar , fuel

Question 28

Where abouts in the consumer tax on a s and d diagram

Answer 28

Above the equilibrium to the left

Question 29

Where abouts is the producer tax on a s and d diagram

Answer 29

Below the equilibrium to the left

Question 30

Advantages of flat tax

Answer 30

- Reduces consumption of harmful products - Long term it prevents further NHS spending - Source of revenue - reinvesting the tax revenue into “cleaning up” in the industry e.g. pollution

Question 31

Disadvantages of flat tax

Answer 31

- punishes the poorest in society - creates a “black market”(unregulated) - takes time to put into place - hard to put the “correct price” on it