Economic Principles

Question 1

What is a trade off

Answer 1

getting one thing usually means giving up another eg. work vs leisure

Question 2

what type of trade off might the government face

Answer 2

spending money on education vs defence

Question 3

what type of trade off might a person face

Answer 3

studying vs tv

Question 4

what type of trade off might a firm face

Answer 4

environmentally friendly and expensive products or cheaper products

Question 5

what is efficiency

Answer 5

society getting the most it can from its scarce resources

Question 6

what is equity

Answer 6

benefits of resources are being distributed fairly among the members or society

Question 7

example of people responding to incentives

Answer 7

plastic bag levy, people start using bag for lives more

petrol prices increase, people start using public transport more often

Question 8

examples of how trade can make everyone better off

Answer 8

gains, competition, specialising in what theyre good at eg oranges in spain,

Question 9

negatives of trade

Answer 9

when China joined the World Trade Organisation, it increased competition in labour markets, resulting in unemployment elsehwere, eg now USA has taxes on Chinese imports

Question 10

what is a market economy

Answer 10

an economy that allocates resources through the decentralised decisions of many firms and households as they interact in markets for goods and services

Question 11

example of the government improving market outcomes

Answer 11

social welfare payments aim to achieve a more balanced spread of resources and economic wellbeing

Question 12

what is market failure

Answer 12

when the market fails to allocate resources efficiently

Question 13

two things that may cause market failure

Answer 13

externality and market power

Question 14

what is externality

Answer 14

impact of a firm’s/individual’s behavior on a bystander

Question 15

what is market power

Answer 15

ability of a single firm/individual to affect market prices eg Microsoft dominates operating systems market

Question 16

what is economic growth

Answer 16

the increase in the amount of goods and services an economy produces over time

Question 17

what does gdp stand for

Answer 17

gross domestic product per head

Question 18

what is gdp per head

Answer 18

the markets value of all final goods and services produced within a country over a given period divided by the population of the country per capita figure

Question 19

what is the standard of living

Answer 19

measure of welfare based on the amount of goods and services a person’s income can buy

Question 20

examples of inflation

Answer 20

zimbabwe 2007 2,200% and 2008 321,000,000%

Question 21

what is inflation

Answer 21

increase in the overall level of prices in the economy ie the value of money falls

Question 22

what happens when the government prints too much money

Answer 22

inflation

Question 23

what is productivity

Answer 23

quantity of goods and services produced from each hour of a worker in a factories production line