Economics - Unit 1

Question 1

What is a resource?

Answer 1

Something used to produce an output

Question 2

What are the factors of production?

Answer 2

Labour - human input they have different skills and if they have a higher human capital then they are more productive
Land - land itself and the natural resources
Capital - goods that are used to produce other goods and services
Enterprise - taking risks and having. Ideas

Question 3

What is the primary sector?

Answer 3

The extraction of raw materials e.g. Mining

Question 4

What is the secondary sector?

Answer 4

Raw materials manufactured into goods

Question 5

What is the tertiary sector?

Answer 5

The service sector

Question 6

What is opportunity cost?

Answer 6

The next best alternative forgone when making a choice because the scarcity of capital economic problem and unlimited needs and wants

Question 7

What is a market?

Answer 7

Where buyers and sellers meet to exchange goods

Question 8

What is the market economy?

Answer 8

Where all the resources are allocated by private individuals and groups

Question 9

What is a planned economy?

Answer 9

Where all resources are allocated by the government

Question 10

What is a mixed economy?

Answer 10

Were some resources are allocated by the government and others by individuals or groups

Question 11

What is the public sector of the economy?

Answer 11

The government sector of the economy which are organised and owned and ran by the government

Question 12

What is the private sector of the economy?

Answer 12

The sector of the economy where firms are owned and run by private individuals and groups were their main aim is profit maximisation

Question 13

What are the benefits to specialisation?

Answer 13

• workers become more productive
• lower average costs due to increased productivity
• production levels are increased
• higher pay
• specific skills improved
• motivation from job satisfaction

Question 14

What are the costs of specialisation?

Answer 14

• increased cost of training workers
• workers become bored and quality may suffer
• more expensive workers
• borden due to lack of variety
• other skills suffer
• eventually replaced by machinery

Question 15

What is the medium of exchange?

Answer 15

Handing over money for an item

Question 16

What is the unit of account?

Answer 16

Measuring the value of money

Question 17

What is the store of value?

Answer 17

When it keeps it value

Question 18

What is means of deferred payment?

Answer 18

Borrowing money

Question 19

What is a competitive market?

Answer 19

A market situation in which there are a large number of buyers and sellers

Question 20

What are the areas of competition?

Answer 20

• price
• quantity
• promotions
• branding
• advertising
• innovation

Question 21

What are the benefits of a competitive market for a consumer?

Answer 21

Shop around for the highest quality and lowest prices
Variety
Good consumer service

Question 22

What are the costs of a competitive market for a consumer?

Answer 22

Small firms cant gain economies of scale so cannot provide low costs
Confusion

Question 23

What are the benefits of a competitive market for a firm?

Answer 23

Gain market share
Grow larger
Able to provide goods and services at a price that are willing to pay it will thrive

Question 24

What are the costs of a competitive market to a firm?

Answer 24

Monopolies can drop prices

Fail to satisfy consumers so it will fail

Question 25

What is the economic problem?

Answer 25

Wants are infinite but resources are limited and scarce

Question 26

What is a monopoly?

Answer 26

When there is only one firm operating in the market

Question 27

What is a monopoly power?

Answer 27

When a firm has more than 25% of the market

Question 28

How do you achieve monopoly power?

Answer 28

- Merger and takeover- less choice due to fewer firms you can there for raise prices and lower quality - statutory monopoly - give by Gov. - internal expansion - build more factories and shops increasing market share - branding - brand increases gain market share - cost barriers - firms gain economies of scale and lower there average cost so they can keep prices low to stop new firms entering a market

Question 29

Positive points of a monopoly

Answer 29

R + D International competition Exploitation of economies of scale which would lower average costs and then they may reduce prices

Question 30

Name the negative points of a monopoly

Answer 30

High prices due to no competition Poor quality due to lack of competition Land grab and bad for local economy

Question 31

What is demand?

Answer 31

The quantity buyers are willing and able to buy at a given price in a given period of time

Question 32

What does demand need to become effective?

Answer 32

The consumer must be able and willing to buy

Question 33

What is the contraction of demand?

Answer 33

The fall in quantity demanded due to the rise in price

Question 34

What is the extension of demand?

Answer 34

The increase in quantity demanded due to a fall in price

Question 35

what are the things that cause the demand curve to shift ?

Answer 35

PASIFIC - population - advertising - substitutes - income - fashion - interest rates - complements

Question 36

What is supply?

Answer 36

The quantity a producer is willing and able to produce at a given price in a given period of time - more suppliers will enter a market when the price rises as the product is more profitable

Question 37

What causes the supply curve to shift?

Answer 37

``` Productivity Indirect taxes Number of firms entering the market Technology Subsidies Weather Cost if production ```

Question 38

What does the PED measure?

Answer 38

It measures the responsiveness of the quantity demanded to a change in the price of a good - always negative because price and quantity move in opposite directions

Question 39

What are the factors that influence PED?

Answer 39

``` Number of close substitutes in the market Habit forming goods Luxuries and necessities Time period under consideration Percentage of income spent on a good ```

Question 40

Why is PED important to a firm?

Answer 40

Important for making price decisions if they want to increase total revenue - if elastic they put price down to increase total revenue - if inelastic they increase price to increase total revenue

Question 41

What does PES measure?

Answer 41

Responsiveness of quantity supplied to a change in price

Question 42

What are the factors that influence PES?

Answer 42

- Level of spare capacity - Level of stock and work in progress - Production lags - Time period - Substitutability of factors of production