December Mock Revision

Question 1

Normative Statement

Answer 1

An Opinion

Question 2

Positive Statement

Answer 2

A Fact

Question 3

The Basic Economic Problem

Answer 3

Scarce Resources, Unlimited Wants

Question 4

Opportunity Cost

Answer 4

the loss of other alternatives when one alternative is chosen.

Question 5

Allocatively Efficient

Answer 5

The point on the PPF diagram where the point is on the line

Question 6

Productively Efficient

Answer 6

The point on the PPF line where producing goods are at its lowest cost.

Question 7

Utility

Answer 7

the amount of satisfaction or benefit that a consumer gains from consuming a good or service.

Question 8

Marginal Utility

Answer 8

the satisfaction gained form consuming an additional unit of a good.

Question 9

Diminishing marginal utility

Answer 9

Additional units give successively smaller increases in total satisfaction.

Question 10

Neoclassical assumptions

Answer 10

Rational Consumer Behaviour

Question 11

Imperfect information

Answer 11

makes it difficult for economic agents to make rational

decisions and is a potential source of market failure.

Question 12

Bounded rationality

Answer 12

try to act rationally but their ability to do so is severely restricted.

Question 13

Bounded self-control

Answer 13

Individuals have good intentions but lack the self-discipline to see them through.

Question 14

Predictably irrational

Answer 14

Because of bounded rationality and bounded self-control people are predictably irrational.

Question 15

Asymmetric information

Answer 15

A form of imperfect information when one party (usually the seller) has more/superior information than another (usually the buyer)

Question 16

PED

Answer 16

% change in quanity
/
% change in price

Question 17

PES

Answer 17

% change in supply
/
% change in price

Question 18

YED

Answer 18

% change in demand
/
% change in supply

Question 19

XED

Answer 19

% change demand of good A
/
% change in price of good B

Question 20

Joint Demand

Answer 20

Where two or more commodities or services are demanded together

Question 21

Joint Supply

Answer 21

Product or process that can yield two or more outputs

Question 22

Composite Demand

Answer 22

Where goods have more than one use.where goods have more than one use.

Question 23

Derived Demand

Answer 23

derived demand is demand for a factor of production or good that occurs as a result of the demand for another intermediate or final good.

Question 24

Diminishing Returns

Answer 24

As more of a variable factor (e.g. labour) is added to a fixed factor (e.g. capital), a firm will reach a point where it has a disproportionate quantity of labour to capital and so the marginal product of labour will fall, thus raising marginal costs.