Economics Flashcards
(103 cards)
1
Q
The basic economic problem
What is the definition of scarcity?
A
A lack of resources available to produce all of the goods and services available to satisfy unlimited wants.
2
Q
The basic economic problem
What is the definition of finite resources?
A
Non renewable resources that will eventually run out.
e.g. Machines (metal), water, plastic, electricity
3
Q
The basic economic problem
What is the definition of renewable resources?
A
Resources that can be replaced as they are used to produce goods and sevices.
e.g. Paper, workers (labour), cardboard,
4
Q
The basic economic problem
There are limited resources and unlimited wants which leads to the problem of _____ and so _____ have to be made.
A
There are limited resources and unlimited wants which leads to the problem of scarcity and so choices have to be made.
5
Q
The basic economic problem
How do consumers decide how to spend their money?
A
e.g. Buy a new car or go on a holiday
6
Q
The basic economic problem
How do businesses decide how to benefit their business?
A
e.g. Invest in new machinery ot spend money training workers
7
Q
The basic economic problem
How do workers decide how to spend their free time?
A
e.g. Work extra hours to earn money or go home on time to spend timw with family
8
Q
The basic economic problem
How do governments decide how to benifit their country?
A
e.g. Build a school or a hospital
9
Q
The basic economic problem
What are the Factors of Production?
A
Capital, enterprise, labour and land
10
Q
The basic economic problem
What are the FoP used for?
A
The resources that are used to produce goods and services.
11
Q
The basic economic problem
What is capital?
A
Anything that is man-made as well as the money invested into the business.
12
Q
The basic economic problem
What is enterprise?
A
The owner of the business that have taken the risk of setting it up.
13
Q
The basic economic problem
What is labour?
A
The physical and/or mental effort of workers.
14
Q
The basic economic problem
What is land?
A
The natural resources taken from the land and used by a business.
OR
The land inself.
15
Q
The basic economic problem
What is the payment for capital?
A. Wages
B. Interest on loans
C. Profit
D. Rent
A
B
16
Q
The basic economic problem
What is the payment for enterprise?
A. Wages
B. Interest on loans
C. Profit
D. Rent
A
C
17
Q
The basic economic problem
What is the payment for labour?
A. Wages
B. Interest on loans
C. Profit
D. Rent
A
A
18
Q
The basic economic problem
What is the payment for land?
A. Wages
B. Interest on loans
C. Profit
D. Rent
A
D
19
Q
The basic economic problem
What is the definition of mobility of FoP?
A
How easy or difficult it is for FoP to be transferred to different industries.
20
Q
The basic economic problem
What is the definition of occupational mobility?
A
Is when a recource is able to change task, e.g. lawyer to judge.
21
Q
The basic economic problem
What is the definition of geographical mobility?
A
Is when the resource changes its location, continuing to fulfill its same function as before.
22
Q
The basic economic problem
How do you increase the quantity and quality of capital?
A
Quantity:
Business buy more machinery
Quality:
Improvements in technology
23
Q
The basic economic problem
How do you increase the quantity and quality of enterprise?
A
Experience of managing business or education.
24
Q
The basic economic problem
How do you increase the quantity and quality of labour?
A
Quantity:
1. Increase population
2. Increase immigration
Quality:
Education and training
25
# The basic economic problem
How do you increase the quantity and quality of land?
Quantity:
1. Reclaming land from the sea
2. Discovery of more oil
Quality:
The use of fertilisers
26
# The basic economic problem
What is the definition of opportunity cost?
The next best alternative or highest value alternative foregone (given up) when making a choice.
27
# The basic economic problem
What does a production possibility curve show?
Shows the maximum possible output for two goods or cervices with a given amount of resources.
28
# The basic economic problem
What is the definition of revenue?
Income from the sale of goods and services.
29
# The basic economic problem
What does an increase in production possibilities in a PPC look like?
Curve from top left to bottom right, the PPC shifting to the right.
30
# The basic economic problem
What does it mean when there is an increase in production possibilities?
| PPC
This country can produce more of both goods than before.
31
# The basic economic problem
What does a decrease in production possibilities in a PPC look like?
Curve from top left to bottom right, the PPC shifts to the left.
32
# The basic economic problem
What does it mean when there is a decrease in production possibilities?
| PPC
This country can produce less of both goods than before.
33
# The allocation of resources
What is the definition of microeconomics?
The study of individual and busniess economic behavior.
34
# The allocation of resources
What is the definition of macroeconomics?
The study of the whole economy.
35
# The allocation of resources
What are the differences of micro and macroeconomics?
Microeconomics:
Consumer, producer, supply, demand, and price
Macroeconomics:
National income, inflation, GDP, unemployment
36
# The allocation of resources
List at least 2 choices that are microeconomics.
1. Bad weather impacts the rice harvest
2. An increase in your parents' wages
3. The invention of a new machine to clean floors quickly
4. An increase in the price of cocoa
37
# The allocation of resources
List at least 2 choices that are macroeconomics.
1. Unemployment increasing
2. The government raising income tax
3. Rising wages for all workers across the country
38
# The allocation of resources
Who are the private sector?
Individuals and businesses
39
# The allocation of resources
Who is the public sector?
Government.
40
# The allocation of resources
What is the definition of free market economy?
All decisions are taken by the private sector in a free market economy.
There is little or no government intervention.
41
# The allocation of resources
What is the definition of mixed economy?
All decisions about recource allocation are taken together by the government and the private sector.
The government provides goods and services, such as public utilities, safety, and military.
42
# The allocation of resources
What is the definition of planned economy?
All decisions about resources allocation, price and how goods and services will be produced and allocated are taken by the public sector.
43
# The allocation of resources
Name at least a country for being in the free market economy, mixed economy, and planned economy
Free market economy:
Hong Kong, USA, etc.
Mixed economy:
France, India, etc.
Planned economy:
Russia, North Korea, etc.
44
# The allocation of resources
What is the definition of demand?
The quantity of a good or service that consumers are **willing and able** to buy at a given price in a particular time period.
45
# The allocation of resources
What is the law of demand?
As price increase, quantity demand decreases. As price decreases, quantity demand increases.
46
# The allocation of resources
What is the definition of individual demand?
The amount of a product an individual would be willing and able to buy, at different prices.
47
# The allocation of resources
What is the definition of market demand?
The total demand for a product at different prices. It is found by adding up each individual's demand at different prices.
48
# The allocation of resources
List at least 2 factors influencing shifts in the demand curve.
1. Chnages in consumer income
2. Price of related goods (substitute and complement goods)
3. Consumer preferences
4. Expectations
5. Population changes
6. Changes in tax [income tax→less disposable income(less money)]
49
# The allocation of resources
What is the definition of normal goods?
When income rise, the demand for normal goods rises.
50
# The allocation of resources
What is the definition of inferior goods?
When income rise, demand for inferior goods fall.
51
# The allocation of resources
What is the definition of complement goods?
Products that you buy together are jointed demand (tennis balls and tennis rackets).
52
# The allocation of resources
What is the definition of substitute goods?
Products that can replace each other in consumption (chicken and pork).
53
# The allocation of resources
Describe a movement on a demand/supply curve.
Price factor
Contraction/decrease in quantity demand
Extension/increase in quantity demand
54
# The allocation of resources
Describe a shift on a demand/supply curve.
Non-price factor
Shift left (decrease in demand)
Shift right (increase in demand)
55
# The allocation of resources
What is the definition of supply?
The quantity of a product that a producer is willing and able to supply at a given price.
56
# The allocation of resources
What is the law of supply?
As price increases, the quantity supplied increases
As price decreases, the quantity supplied decreases
57
# The allocation of resources
How to calculate profit?
Revenue - Cost of operating = Profit
58
# The allocation of resources
List at least 2 factors that influence shifts in a supply curve.
1. Changes in the cost of the FoP (wages)
2. Improvements in technology
3. Changes in the price of other products
4. Changes in weather conditions
5. Changes in taxes on business profits
6. Business optimism/confidence
59
# The allocation of resources
What is the definition of surplus?
Too much of something.
60
# The allocation of resources
What is the definition of shortage?
Too little of something.
61
# The allocation of resources
What is the definition of price elasticity of demand (PED)?
It measures the responsiveness of quantity demanded to changes in the price of a good or service.
62
# The allocation of resources
What is the definition of elastic?
Where QD/QS is responsive to changes in price.
63
# The allocation of resources
What is the definition of inelastic?
Where QD/QS is not very responsive to changes in price.
64
# The allocation of resources
How to calculate price elasticity of demand/supply?
PED/PES = % change in quantity demand/supply ÷ % change in price
65
# The allocation of resources
How determine if PED/PES is inelastic or elastic.
If the answer is less than 1 we call the PED/PES inelastic.
If the answer is greater than 1 we call the PED/PES elastic.
66
# The allocation of resources
List at least 2 fatcors that determine how elastic PED will be.
1. Necessity or luxury
2. Number of avaliable substitutes (how easily a consumer can switch)
3. Branding
4. Habitual consumption
67
# The allocation of resources
How to calculate revenue?
Revenue = Price * Quantity
68
# The allocation of resources
What is the definition of revenue?
The money firms receive from selling their goods and services.
69
# The allocation of resources
What is the definition of price elasticity of supply (PES)?
This is a measure of the responsiveness of quantity supplied to a change in the price of a good.
70
# The allocation of resources
List at least 2 factors that influence PES.
1. Time taken to produce it
2. The amount of stock or ability to store the stock
3. Level of spare compacity (the maximum amount that can be produced)
4. The mobility and cost of FoP
71
# The allocation of resources
List all the special supply curves, describe their looks, and state what the PES is.
1. Perfectly elastic (horizontal supply curve)(PES=infinity)
2. Perfectly inelastic (vertical supply curve)(PES=0)
3. Unitary {supply curve that passes through the origin (0,0)} (PES=1)
72
# The allocation of resources
List all the special demand curves, describe their looks, and state what the PED is.
1. Perfectly elastic (horizontal demand curve)(PED=infinity)
2. Perfectly inelastic (vertical demand curve)(PED=0)
3. Unitary {inward (curve facing towards the side) demand curve}(PED=1)
73
# The allocation of resources
What is the definition of public sector?
The part of the economu under the control of the government, e.g. law enforcement.
74
# The allocation of resources
What is the definition of private sector?
The part of the economy made up of individuals and privately owed businesses, e.g. food.
75
# The allocation of resources
What is the definition of market economic system?
A system with **prices** that are based on **competition** between **private sector** businesses; markets are **not controlled** by the **government** (free market economy)
76
# The allocation of resources
State at least 2 pros of the market economic system.
1. **Competition** (choice for consumers, low prices)
2. **Efficiency** (competition encourages low prices, bussinesses must focus on increasing efficiency to be able to reduce cost)
3. **Incentives** (high profit can be earned by thoses who respond to market signals)
77
# The allocation of resources
List at least 2 cons of the market economic system.
1. Not everyone can afford to pay for essential services (healthcare)
2. There might be too much produced of goods which are considered unhealthy (alcohol)
3. Who would provide services which can't be charged for? (police, street light)
4. Businesses may pollute the environment in order to maximise their products
78
# The allocation of resources
What is the definition of market failure?
The economy's resources are not efficiently allocated. The market does not produce goods and services that consumers most want in the correct quantities.
79
# The allocation of resources
What is the definition of merit goods?
A lack of information about how benificial these products are for consumers which leads to them being under-consumed.
80
# The allocation of resources
What is the definition of de-merit goods?
A lack of information as to how harmful these products are for the consumer which leads to them being over-consumed.
81
# The allocation of resources
List at least 2 ways the government can decrease consumption/production of goods causing market failure.
1. **Indirect taxes** (the government can impose taxes on goods and services that create negative externalities, this increases the price and reduces demand)
2. **Regulations and bans** (introducing strict regulations or outright bans on harmful products)
3. **Subsidies for alternatives** (providing financial incentive for alternatives)
4. **Public awareness campaigns** (educating consumers about the harmful effects of certain goods)
5. **Tradable permits** (limiting the amount of pollution firms can produce and allowing them to trade permits, incentivizing reductions)
82
# The allocation of resources
List the one reason of government intervention through indirect taxes.
**Imposing a carbon tax** (increases fossil fuel cost, encourages shift to cleaner energy, and reduces environmental harm)
83
# The allocation of resources
What is the definition of mixed economy?
An economy that has both the private sector firms and government supplying goods and services.
84
# The allocation of resources
What is the definition of indirect tax?
A taxt on spending that increases the price of goods and services, e.g. good and service tax, value added tax, duties on a specific good such as alcohol and cigarettes.
85
# The allocation of resources
What does the indirect cost increases?
A. A firm's cost of production
B. Cost that are equal to the external costs
C. Goods and services
D. Alcohol or cigarettes
A
86
# The allocation of resources
The firm add costs that are equal to the e_______ c____.
The firm add costs that are equal to the **external costs.**
87
# The allocation of resources
What is the definition of subsidy?
This is a payment made to producers by government to help reduce their cost of production. This will shift the supply curve to the right.
88
# The allocation of resources
List at least 2 criticisms of subsides.
1. **Opportunity cost**, e.g. government have to choose what to spend with the subsidy.
2. **Reduces incentives (efficient use of resources)**, e.g when a business lowers a price of a product then they need to spend the FoP efficiently.
3. **Distorts international competition**, e.g. if a government gives subsidy for businesses then it might be unfair.
89
# The allocation of resources
What is the definiton of public goods?
Goods that consumers can not be excluted from enjoying even if they have not paid for them.
90
# The allocation of resources
What is the definition of non-excludability?
Consumers who have not paid for a good or service can not be excluded from benefiting from the consumption of the good.
91
# The allocation of resources
What is the definition of non-rivalrous?
The consumption of goods by one individual does not prevent another individual consuming the good at the same time.
92
# The allocation of resources
What is the definition of free goods? List at least 2 examples of it.
No opportunity cost, resources are infinite.
E.g. air, sunlight, water.
93
# The allocation of resources
What is the definiton of economic goods? List at least 2 examples of it.
Opportunity cost, resources are scarce, FoP.
E.g. public goods, private goods.
94
# The allocation of resources
What is the definition of maximum price?
Prices are not permitted to rise above a certain level set by the government (otherwise known as a price ceilling).
95
# The allocation of resources
What is the definition of minimum price?
Prices are not permitted to fall below a certain level set by the government (otherwise known as a price floor).
95
# The allocation of resources
What is the benefit and non benefit of minimum price when price is too high?
**Benefit:**
Producer by increasung revenue.
**Non benefit:**
Consumer by making products too expensive.
96
# The allocation of resources
What is the benefit and non benefit of maximum price when price is too low?
**Benefit:**
Consumer by making products cheap.
**Non benefit:**
Producer by decreasing revenue.
97
# The allocation of resources
Describe a demand and supply curve when maximum price was implemented.
There will be a shortage, quantity demanded will be higher than quantity supplied.
98
# The allocation of resources
Describe a demand and supply curve when a minimum price was implemented.
There will be a surplus, quantity supplied will be higher than quantity demanded.
99
# The allocation of resources
Why might a maximum price be implemented?
To ensure goods are affordable (low incomes).
E.g. food items, rent control, basic necessities.
100
# The allocation of resources
Why might a minimum price be implemented?
For the benefit of the producer to ensure sufficiant revenue.
101
# The allocation of resources
What is the definition of minimum wage?
The minimum a worker must be legally paid for their work (usually expressed per hour).
102
# The allocation of resources
Describe a demand and supply curve when minimum wage is implemented.
There will be surplus, quantity supplied will be higher than quantity demanded.
