EXAM AOS 1 intro concepts

Question 1

market

Answer 1

the exchange of goods and services which takes place as a result of buyers and sellers being in contact with one another

Question 2

microeconomics

Answer 2

analysis of the market behaviour of individuals and businesses

Question 3

macroeconomics

Answer 3

Analysis of the overall economy, including markets, businesses, consumers and governments

Question 4

positive economics

Answer 4

Free of personal opinion
Based on fact, evidence
you can collect and see
Can be proved or disproved

Question 5

normative economics

Answer 5

Based on personal opinion
Based on value
judgements
Can’t be proved or
disproved

Question 6

dynamic

Answer 6

pricing changing depending on demands

Question 7

market equilibirum

Answer 7

when the market supply equals the market demand

Question 8

relative

Answer 8

one thing compared to another

Question 9

relative scarcity

Answer 9

resources are limited compared to the demands placed upon those resources via wants and needs

Question 10

factors of production is

Answer 10

used to produce the goods and services to meet the needs and wants of people

Question 11

land

Answer 11

is those resources that occur in nature eg minerals, water, forests, crops, actual land

Question 12

labour

Answer 12

physical and mental effort by humans in the production process, eg bakers in bakery, factory workers

Question 13

capital

Answer 13

resources made to help produce other products eg ovens, factory machine, table and chairs in classroom to produce quality education

Question 14

opportunity cost

Answer 14

is the value of the next best alternative that is foregone whenever a choice is made

Question 15

when does opportunity cost arise?

Answer 15

any time someone makes a choice between
alternatives – choice implies you are giving up something

Question 16

opportunity costs for businesses

Answer 16

They have limited land, labour and capital available – so they have choose what they do and also what they wont do eg Star has only so many teachers and so much space – so we gotta choose which
students get to come here and which subjects to offer to the students

Question 17

Opportunity costs for governments and nations

Answer 17

Choices are really hard for governments

They are always short of resources (mainly
money which comes from tax) – and they always have too many things they would like to do (projects that cost
money eg roads, aged pension, education

Question 18

what does the PPF illustrate?

Answer 18

what a business or even an economy can produce when all resources available are used to maximum efficiency
- no resources are being wasted or under used

Question 19

Points to the left of the curve

Answer 19

are not efficient – more output
could be produced with the same resourcesPoints to the left of the curve

Question 20

Points to the right of the curve

Answer 20

are not currently achievable – you would
need either more resources or existing resources to workmore productively

Question 21

scarce resources. economies and businesses have to choose what…

Answer 21

products to make with their scarce land, labour, capital –they can’t make unlimited quantities of every good and

Question 22

link between scarcity and PPF

Answer 22

The PPF illustrates the combination of goods and services an economy/business can produce with its relatively scarce amount of resources – land, labour and capital

Question 23

PPF and opportunity cost

Answer 23

It shows what a business or an economy has to give up in order to make more of something

Question 24

efficiency

Answer 24

fully utilising all of your land, labour and capit

Question 25

PPF and under-utilisation of resources

Answer 25

Sometimes, some resources either have spare capacity or are not working at their best - Workers are being lazy/scrolling/taking heaps of sick days - Equipment is breaking down - Raw materials are not being accessed on time

Question 26

trade offs

Answer 26

occur whenever individuals, businesses or governments make choices between different ways that scarce resources might be used.

Question 27

cost benefit analysis

Answer 27

it is a technique the decision maker uses to make their decision about the trade-offs

Question 28

the 3 basic economic questions

Answer 28

for an economy arise because of the problem of relative scarcity. They include the What and how much to produce How to produce For whom to produce

Question 29

what and how much to produce

Answer 29

Making decisions about how resources should be allocated or used so that the right types and quantities of goods or services are produced

Question 30

how to produce

Answer 30

deciding the best types of production methods to be used in making goods and services

Question 31

an economic system is

Answer 31

is a collection of national institutions or organisations that coordinate the production and distribution of goods, services and incomes amongst the population.

Question 31

for whom to produce

Answer 31

how the goods, services and incomes that are produced in the economy will be divided or shared between individuals.

Question 32

traditional economies

Answer 32

based on established culture and rituals not common and is usually only used in the most remote pockets of poor or third world countries – among tribes in the Amazon rainforest remote parts of African desert mountains of Papua New Guinea

Question 33

a pure market economy

Answer 33

relies solely on the operation of markets where buyers, sellers and a system of prices answer the three basic economic questions.

Question 34

purely planned economies

Answer 34

rely entirely on powerful and often non-democratic, dictatorial, central governments to make key economic decisions about what, how, and for whom to produce.

Question 35

mixed economies

Answer 35

Almost all of the world’s economies are mixed Almost all of the world’s economies involve elements of market and planned economies Some are closer to one extreme than the other

Question 36

three sector circular flow model

Answer 36

a simple diagram that shows the 3 key economic parts making up a mixed economy

Question 37

flow 1

Answer 37

Households provide factors of production – land, labour, capital – to business

Question 38

flow 2

Answer 38

Business pays households money to rewards households for supplying land, labour, capital to business

Question 39

flow 2a

Answer 39

Households pay taxes to Governments

Question 40

flow 3

Answer 40

Households and governments spend their income on goods and services provided by Business

Question 41

flow 4

Answer 41

Business produces goods and services and supplies them to households and governments

Question 42

purpose of economic activity

Answer 42

the main purpose of economic activity is to help satisfy society’s many needs and wants

Question 43

living standards

Answer 43

a society’s general level of well-being

Question 44

material living standards

Answer 44

measured by individuals access to goods and services – how much stuff can you purchase? Generally, the higher your income, the more stuff you can purchase and the higher your material living standard

Question 45

non-material living standards

Answer 45

measured by the impact that non-material factors have on an individual’s quality of life. Things like leisure time, crime rates, pollution levels, life expectancy, physical and mental health all impact on people’s well-being

Question 46

How does higher and lower economic activity affect material living standards (MLS)?

Answer 46

higher eco act = increased production = increased jobs = increased income = increased capacity to purchase G&S= higher material living standards VICE VERSA FOR LOWER

Question 47

How do higher levels of economic activity impact on non-material living standards (NMLS)?

Answer 47

Most aspects of non-material welfare also benefit from higher levels of economic activity. For example, when production is expanding, the unemployment rate falls while incomes rise. Typically, this helps to reduce stress and social isolation Reduce crime rates strengthen mental and physical health improve the quality of relationships However, environmental outcomes are likely to suffer because of increased pollution, accelerated climate change and the faster depletion of non-renewable resources. Also, stress levels might rise and leisure time might fall because people are working longer hours and spending less time relaxing with family/friends

Question 48

How do lower levels of economic activity impact on non-material living standards (NMLS)?

Answer 48

Essentially, the opposite of the previous page Some measures of NMLS will improve and others will decline – just the opposite way Most aspects of non-material welfare also decline from lower levels of economic activity. For example, when production is falling, the unemployment rate rises while incomes fall. Typically, this helps to increase stress and social isolation increase crime rates worsen mental and physical health worsen the quality of relationships However, environmental outcomes are likely to improve because of reduced pollution, slower climate change and the slower depletion of non-renewable resources. Also, stress levels might fall and leisure time might rise because people are working shorter hours and spending more time relaxing with family/friends