economics (1) Flashcards

Question

point inside PPF - what does this mean(2)

Answer 1

due to UNEMPLOYMENT -any resources not fully employed, -frontier doesnt change but position underneath line - **insufficient allocation of resources, - not achieving maximum satisfaction of wants with min opp cost**

Answer 2

curve: some resources better suited to (oil) production and others (leather, cannot expect move resources from oil to leather w/o loss of productive capacity. move more resources into prod leather, less productive, inc opp cost of leather, --> CONCAVE

Answer 3

items not been produced for consumption but used for production of other goods(machinery) although do not satsify wants now, satisfy in future by expanding ability to produce long run, eco focuses more on prod capital goods ^ productive capactiy and exp higher lvl eco growth (higher pt on frontier 9 long term satsify wants better than country with lower pt)

Answer 4

-must focue on one area of bus activity over another -limited labour, cap, entrepreneurial skill & resources --> focus on products likely to max profit eg. business likely to most effective if can identify next wave in bus growth come from (eg. IT) otherwise enter market too late and cant obtain competitive advantage

Answer 5

holiday instead of taking out mortgage & purchase house. -saving for deposit sig sacrifice, years to pay off mortgage -long term home ownership improves financial security (Dont have to pay rent, asset that can pass to children)

Answer 6

for gvt & entire eco immediate needs: ^ welfare benefits, healthcare --> less funding for edu, infras, r&d --> long term less eco growth (lower skilsl in workforce, less innovation, weak infras (bad transport) short term: politically popular to satisfy immediate wants than plan for future needs

Answer 7

choose how much incoem to save & spend, influenced by income level, age, asset performance, expect of income rise/fall in future, family circumstances, future plans plans in edu, work, family(cut personal expenditure, reduce working hrs & income to care for children), retirement vote in elections (eco policies esp eax & infras, who is best at managing eco and budget & least likely to deliver lower unemployment, inflation & interest rates) ## Footnote spending/saving spending satisfies present wants saving raises future living standards

Answer 8

pricing decisions (max profits, market stat to sell product to mass market/target exclusive group of customers) minimise costs & maximise quality (higher costs for quality equipment --> longer operating life, less maintenance) -choose cheaper inputs/choose pay more for input reliable supply, ethical issues manage industrial relation issues -choose to employ ppl on wage lvls set by industrial awards -negotiate wage agreements with workforce -negotiate individual contracts with staff -encourage union representation/involvement from employees in decisions

Answer 9

* **sig influence over eco choices of ind & bus (price of choice)** may prohibit activities & impose heavy penalties encourage activities & provide incentives for them (eg join private health insurance scheme) gvt influence on eco from** inflencing decisions** of ind & bus and ***providing g&S directly***

Answer 10

any resources used in production of g&s LAND (natural resources), CAPITAL LABOUR ENTERPRISE -another name for resource/input -quantity & quality of eco's FOP/resources influence how welathy/poor country will be (lower standard of living/quality of life with fewer, poor quality resources)

Answer 11

land --> RENT labour --> WAGES capital --> INTEREST enterprise --> PROFIT LLCE --> RWIP

Answer 12

natural materials used in production process (soil, water) owners of natural resources rewarded with rent (all income rewards derived from productive use of natural resources)

Answer 13

**human effort (physical & mental)** to produce g&s -**supply** of labour (can change over time) depends on country's **pop size (birth rate, life expectancy, immigration lvls), school leaving age, retirement age, social attitudes towards women** in workforce rewarded with wages

Answer 14

produced means of production (not produced for immediate consumption, used in producing other g&s) -machinery, factories - owned privately by ind/firms -infrastructure(social overhead capital) owned by community as whole eg. roads, schools capital equipment increases productivity of other resources (how much output produced per factor of production per unit of time) satisfy more wants entrepreneurs borrow money not spent by consumers (savings) to invest in capital goods (funds) -consumers save money > spend, shift resources from consumer to capital goods rewarded by earning INTEREST (etpnrs borrow excess savings in eco, pay interest(price of capital) on their loans -alt, etpnrs invest own surplus funds in cap equip , int % could earn if put funds in bank represents opp cost of investing in capital. capital in economics is NOT financial assets (money, shares, stocks, bonds)

Answer 15

organising LLC to produce g&s, brings production process together return to enterprise is PROFIT (not just revenue earned - expenses), entitled to receive rent for any land use owned in production process, wages for work & interest for capital invested in business. -profit ECOMPASSES

Answer 16

land: limited natural resources for production (fossil fuels, clean air&water) LABOUR -population size -labour market skills -ind's willingness to work CAPITAL -limited by extent to which GVTS & private sector willing to invest, and level of domestic/overseas savings available for investment ENTERPRISE -lim by population size & cultural and eco factors (ability and willingness of ind to innvoate and take risks)

Answer 17

consumer spending patterns -firms respond to demand by obtaining resources to produce items consumers want -pay for resources & labour skilsl to produce g&s demanded -bus decides which combo of resources to use in PP (prod proc), labour intensive/capital intensive

Answer 18

strike balance providing rewards for investment -etpnrs & innovation -ensure acceptable QOL

Answer 19

assign each individual certain lvl of income, commands them a certain proportion of output produced --> exchange income with others to obtain g&s

Answer 20

individuals, businesses and financial institutions

Answer 21

GVT combines with private sector to make up DOMESTIC sector

Answer 22

-not equal within society -provide ppl with income as reward for contribution to PP, value of input (labour) -price paid for inputs determines ind's share of total output, depend on how scarce/highly demanded resources are

Answer 23

-provides incentives for ppl to obtain better skills and work harder to **improve** their **share of output/develop entrepreneurial skills** and **start business --> improve resource base, encourage innovation & technological adv**

Answer 24

-unfair for those w/ ***illness, age, disability*** -those w/ **less bargaining power unable to secure fair return for labour input**

Answer 25

-take money from higher income earners w/ taxation & redistributing to lower income earners through social security payments

Answer 26

allows ind to specialsie in how they contribute to production process (paid in money)

Answer 27

recurring fluctuations in level of eco growth/activity due to domestic/international factors, affects income levels, employment opp and QOL of eco | generally towards increased output

Answer 28

amount of g&s produced in given period of time

Answer 29

stage og bus cycle w/ decreasing eco activity for 2 consecutive quarters (6 months) of negative eco growth (fall in GDP)

Answer 30

-sig disruptions for ind & businesses firms: - postpone plans for new investment -reduce production -reduce demand for labour hence, employment falls

Answer 31

-families forced to rely on savings & social security payments to meet expenses while normal sources of income 'dried up' -unemployed reduce consumption --> eco contract further --> more out of work --> poverty, living standards fall, health problems rise, edu opp disrupted, social problems (crime, suicide) ^ --> LOWER QOL

Answer 32

-boom in eco growth = increased investment & production --> ^ demand for labour --> falling unemployment lvls --> ^ disposable income available --> further eco expansion as consumption lvls rise --> improve QOL

Answer 33

FALLING prod g&s FALLING lvls consumption & investment FALLING income lvls FALLING QOL RISING unemployment PC&IIQU

Answer 34

INCREASING prod of g&s RISING levels of C&I RISING income levels RISING QOL FALLING unemployment for prod of g&s, FALLING --> INCREASING, rest is falling to rising

Answer 35

-to restore eco to growth -improve employment opp -ensure eco sustain eco grwoth for longer period of time to avoid major eco downturns

Answer 36

-activities in earning income & spending on g&s -owners of productive resource + consumers -supply FOP (INPUTS) eg. labour & enterprise to BUS to produce g&s -reward for supply resources to firms, ind receive incomes in RENT, WAGE, INTEREST, PROFIT (RWIP) -spending goes to STI & consumption

Answer 37

-all business firms engaged in production & sale of g&s (apart from financial servies for financial sector) -all activities involved with BUYING FOP and USING to produce & sell g&s -businesses & individuals are INTERDEPENDENT (need each other) !!! cfoi depicts flow of money between ind & bus, NOT flow of g&s/fop

Answer 38

-all institutions engaged in BORROWING and LENDING money -INTERMEDIARIES between SAVERS and BORROWERS of money -banks, superfunds, life insurance comp...

Answer 39

undertake saving & investment

Answer 40

-financial ins (capital market) -all financial intermediaries accepts savings (depositys) from ind & lend to bus for investment purposes -**mobilise savings** so they can be used for investment

Answer 41

savings involves money put aside & withdrawn from cfoi -reduce size of cfoi --> reduce lvl eco activity --> upsets state of equilibrium in eco

Answer 42

flows of money that increase aggragate income & general level of eco activity (IGX) investment, GVT spending, exports

Answer 43

fall in expenditure on g&s fall in prodction fall in demand for resources fall in income to owners of resources

Answer 44

falling expenditure falling production falling income rising unemployment

Answer 45

stops reduction of cfoi by counteracting the leakage of savings

Answer 46

savings for investment which creates capital goods for eco's growth -forgoing current ocnsumption of g&s can invest capital and improve future productive capacity of eco to produce greater volume in future

Answer 47

current expenditure made to obtain future benefits -INJECTION into CFOI opposite effects of LEAKAGE (increases size --> eco activity)

Answer 48

1. increased investment 2. increased PRODUCTION of CAPITAL GOODS 3. increased DEMAND for RESOURCES 4. increased INCOME 5. increased DEMAND for G&s --> increased demand...

Answer 49

satisfy **collective wants** (roads, schools, hospitals) by imposing **taxes on other sectors** of eco

Answer 50

1. imposes TAXES on ind&bus 2. uses tax revenue for GVT EXPENDITURE

Answer 51

leakage - when inds pay income tax, reduces amt money to spend on g&s when bus taxed, reduces funds available to pay for resources reduce lvl eco activity: falling income, output, employment opp

Answer 52

injection into CFOI 2. when gvt spends rev on collective g&s, provides income to employees 2. gvt uses rev to make transfer payments (pensions..) as income to recipients increase eco activity: rising income, output, employment opp

Answer 53

all transactions AUS eco has with world -exports (g&S produced in AUS sold overseas) -imports -INTERNATIONAL MONEY FLOWS (financial transactions eg. borrowing, lending)

Answer 54

leakage - money withdrawn from aus eco and paid to bus overseas -lending overseas

Answer 55

leakages = injection S + T + M = I + G + X savings taxation imports = investment, gvt expenditure, exports

Answer 56

DOWNTURN in eco activity lvl -falling incomes, production, -rising unemployment as eco activity falls --> leakages fall (consumers less income to SAVE, SPEND, collect as TAX) --> restore to equilibrium at LOWER INCOME level

Answer 57

UPTURN in eco activity -rising incomes, production, employment -eco activity ^ --> leakages ^ (more income to save, spend, tax) --> restore to equilibrium at HIGHER INCOME level

Answer 58

change TAX levels and GVT REVenue --> manipulate size inj&leak and overall eco activity -can **offset undesirable outcomes from inequality of S&i or IT&MF** (savings and investment, international trade and money flows) -stimulate eco by ^injections relation to leakages, dampen vice versa

Answer 59

injection - money paid to aus bus by consumers in other countries -foreigners lending moeny also

Answer 60

all **major eco decisiosns** made by **ind & private firms** motivated by ***self interest*** -most eco **resources owned by private sector** -ppl seek wealth w/o gvt intervention aka CAPITALIST, FREE ENTERPRISE, LAISSEZ-FAIRE

Answer 61

centrally planned eco -centrally planned system -gvt makes eco decisions -ind choices little role infleucning eco outcomes -public ownership of FOP allows gvt allocate resources as desires no longer pursued by any major eco but previously Russia, China

Answer 62

those owned and controlled means of production become extremely wealthy while majority exploited and had few opp to get out of poverty -vulnerable to volatile cycle of boom and bust

Answer 63

network of buyers and sellers seeking to exchange product at certain price -in free market eco, markets for all g&s and for resources that produce them

Answer 64

*sell finished g&s to HH & foreign sector interaction of demand for and supply of g&s -sellers are bus & their output decisions make up product supply -price affects lvl consumer demand & supply by bus

Answer 65

affects lvl consumer demand and supply by bus -consumers want to buy lowest possible price to satisfy more wants -firms want to sell at highest possible price to maximise profits

Answer 66

process where forces of supply and demand interact to determine market price g&s sold and quantity produced

Answer 67

market for FOP (input into PP) -influenced by changes in demand & supply in product market -eg. to increase supply, increase wages

Answer 68

for specific level of income, increase in CONSUMPTION causes **equal reduction** in level of SAVING vice versa **change in disposable income --> change levels of consumption & savings**

Answer 69

1. market system (price mechanism, product & factor market) 2. PRIVATE OWNERSHIP OF PROPERTY 3. CONSUMER SOVEREIGNTY 4. FREEDOM OF ENTERPRISE 5. COMPETITION

Answer 70

ind have right to own resources and use to derive income and acquire wealth -right to sell property/transfer ownership to apnother under personal conditions

Answer 71

-free to choose how they'll spend income to satisfy wants -ultimately decide g&S produced by choosing which wants to satisfy -bus produce g&s demanded --> SOVEREIGNTY -consumers determine answer what to produce and how much produced

Answer 72

individuals have right to use resources as choose -entrepreneurs free to set profit-making activities and determine g&s they produce and how to produce -workers free choose occupations/work/not

Answer 73

manner which consumers though **market demand collectively determine** what produced and **quantity** of production

Answer 74

competition is pressure on firms in market eco to lower prices/improve quality of output to ^sales of g&s to consumers -allows price mechanism to work effectively -large no. buyers & sellers, no single buyer/seller big enough on own to influence market price to have greater bargaining power over others -less competitive market, few large bus can charge higher prices to make excessive profits at expense of consumer -pure market eco large no. producers compete in every industry

Answer 75

proportion of total income spent on consumption

Answer 76

prop of total income not spent, saved for future consumption

Answer 77

C/Y = APC S/Y = APS

Answer 78

save greater proportion of their income

Answer 79

**INCOME LEVELS & future EXPECTATIONS** Cultural factors Confidence & future expectations **Life stage & age distribution** GVT policies Availability of credit

Answer 80

income across eco rise --> greater capacity to save -saving may higher in ecos with greater INEQUALITY in income distribution (higher income = more capacity to save) -uncertain of future income lvls, more likely to save

Answer 81

influenced by individual personality factors (cautiouss vs easygoing) wider cultural values (previous gens save more than today

Answer 82

consumers worried about eco outlook/job stability/future income --> cautious, save more confident abt future & expect income rise --> increase consumption & save less

Answer 83

consump & saving behaviour changes over time, diff phases -young adulthood -start family, settle down -late middle age incomes generally highest -retirement

Answer 84

make more attractive to save -lower taxes on super savings -spend (abolition of consumption tax)

Answer 85

credit CHEAP & readily available --> spending likely higher (creates new source of money for expenditure) less likely to save if confident they'll access credit easily in future

Answer 86

LEVEL OF INCOME and AGE

Answer 87

save (APS rises, APC falls)

Answer 88

more income ^, dont need to spend as much of income on necessities

Answer 89

-relationship between income & consumption -upward slope with gradient <1 -positive y-int

Answer 90

faster, falls

Answer 91

proportion of each extra dollar of earned income SPENT on consumption change in consumption /change in income

Answer 92

proportion of each extra deollar of earned income NOT spent, SAVED for future consumption change in saving/change in income both denom change in income

Answer 93

MPC + MPS = 1 each extra dollar of income earned either spent or saved

Answer 94

mpc FALLS --> mps RISES therefore consumption function LESS STEEP as income RISES

Answer 95

lower (income) skills, exper, edu spend (save) very little dis-save/borrow

Answer 96

(incomes) rise smaller (prop) assets retirement

Answer 97

earn (income) from labour savings GVT's age pension

Answer 98

lower lower save more to accumulate wealth & assets for retirement whereas lower earners MUST use higher prop of income to meet costs of daily needs (living expenses)

Answer 99

triangle with line of consumption in middle bottom left and right dissavings peak is savings school --> work --> retirement(x-axis age) y-axis income)

Answer 100

satsifaction individuals derive from consuming g&s

Answer 101

individual satisfied more of their wants but more CONSTRAINED with ability to INCREASE utility by lvl of income & market price of g&s

Answer 102

1. level of INCOME 2. PRICE of g/s 3. price of SUBstitute/COMPLEMENT goods 4. consumers TASTES & PREFERENCES 5. ADVERTISING

Answer 103

earn higher incomes, tend to buy more items of higher quality

Answer 104

decide whether/not willing to pay nominated price for item **given lvl of income** some goods **necessities regardless price changes need to buy**(price of basic food ^, demand will not reduce greatly, luxury items reduce demand when $^)

Answer 105

**QUANTITY** of good **demanded** at time **affected by PRICES** of **OTHER** goods. SUBS (butter & margarine: price of margarine rises --> demand for butter increase) COMPLEMENTS tend to purchase together ($ iPhone falls, expect INCREASE in demand for iPhones & complements (airpods))

Answer 106

good consumers may choose to buy in place of another good

Answer 107

good used in CONJUNCTION w/ another good

Answer 108

individuals purchase g&s give them highest level of utility some g&s give individual consumer higher lvl satisfaction than others as consumer tastes & preferences change over time, so will demand for certain goods -innovation & tech progress, demand new & better products at expense of superseded ones

Answer 109

can create demand for certain g/s non existed before. -can make demand for g&s less RESPOSNIVE to price increases by building CUSTOMER LOYALTY to brands over time

Answer 110

rewards to owners of FOP (sellign these)

Answer 111

1. RENT from land 2. WAGES from labour 3. INTEREST from capital 4. PROFIT from entrepreneurial skills

Answer 112

wage/salary payments when participating in labour market -main source of income -includes **non-wage income** (fringe benefits, employer contributions to super, workers compensation payments)

Answer 113

when rented, source of income -iown **investment property** generates property income

Answer 114

RETURNS from ownership of capital -wealth creates ongoing income through returnes from owning capital -indirectly through super/other investment funds -owning SHARES (earn dividends yrly) -earn interest on savings in cash management accs/bonds

Answer 115

operate businesses, make profit, income is return for entrepreneurial skill

Answer 116

payments made to INCREASE income of individuals in need of assistance by GVT incoem collected through taxation & transferred from GVTs to individuals

Answer 117

age pension (67+ & retired from work) disability support pension -permanent, physical/intellectual/psychiatric condition stops them from working JobSeeker payment (22-67 seeking work, unable to find, unemployed)

Answer 118

minimum income safety net allowing individuals w/ low incomes to purchase basic necessities GVTs may raise transfer payments to increase consumer DEMAND & help eco growth

Answer 119

elderly & disabled (least for ATSI ) aged care & National Disability Insurance Scheme

economics (1) Flashcards

chapter 1-4 (144 cards)