FOP, PPC's, Economies, Division of labour & specialisation, margins- TB

Question 1

What is scarcity?

Answer 1

When demand for a resource is greater than supply as resources are limited

Question 2

What is an economic good?

Answer 2

Goods that are scarce

Question 3

What is a free good?

Answer 3

Good that aren’t regarded as scarce (sea water)

Question 4

What are wants and what are needs?

Answer 4

Wants= Non-essential desires
Needs= Things essential for human survival

Question 5

What are the 3 economic agents?

Answer 5

Households (individuals), government and firms/ businesses

Question 6

What is rationality?

Answer 6

Economic agents acting in their best interests

Question 7

What is utility?

Answer 7

The benefit derived from the consumption of a good or service

Question 8

What are the 4 factors of production?

Answer 8

Land, Labour, Capital and Enterprise

Question 9

What are the rewards for each factor of production?

Answer 9

Land= rent
Labour= wages
Capital= interest
Enterprise= profit

Question 10

What is a positive statement?

Answer 10

A statement about what IS

Question 11

What is a normative statement?

Answer 11

A statement involving a value judgement about what OUGHT TO BE

Question 12

What is a value judgement?

Answer 12

A statement based on your opinions/ beliefs rather than facts

Question 13

What is a trade-off?

Answer 13

Exchange something of value, especially as part of a compromise

Question 14

What is opportunity cost?

Answer 14

The loss of other alternatives when one alternative is chosen

Question 15

What does a PPC show?

Answer 15

The maximum amount of two economic goods that can be produced using the same amount of materials

Question 16

What could cause a shift outwards in a PPC curve?

Answer 16

Improved technology, improved quality or quantity of any FOP

Question 17

What could cause a shift inwards in a PPC curve?

Answer 17

Natural disaster, worsened quality or quantity of any FOP

Question 18

What is a market economy?

Answer 18

Where market forces are allowed to guide the allocation of resource within a society (e.g. Taiwan)

Question 19

What is a centrally planned economy?

Answer 19

Where the government guides resource allocation within a society (e.g. North Korea)

Question 20

What is a mixed economy?

Answer 20

Where a combination of market forces and government guides the allocation of resources within a society

Question 21

What is the invisible hand?

Answer 21

A term from Alan Smith to describe the way that resources are allocated in a market economy

Question 22

What is specialisation?

Answer 22

Concentrating on a task or activity in order to become an expert in it- more efficient and beneficial for economic agents

Question 23

What is the division of labour?

Answer 23

Where the production is broken down into a sequence of stages and workers are assigned specific stages

Question 24

What is a barter system?

Answer 24

An economy without money so that transactions in goods and services rely on direct exchange

Question 25

What is money a medium of?

Answer 25

Exchange

Question 26

3 Specialisation advantages?

Answer 26

1) More everything (profit, pay, output etc.)
2) Tackles scarcity
3) Allows trade

Question 27

3 Specialisation disadvantages?

Answer 27

1) Dull for workers
2) Inflexibility
3) Dangerous for countries (overspecialisation)

Question 28

What is marginal utility?

Answer 28

Additional utility gained from consuming one extra unit of a good or service

Question 29

What is the law of diminishing utility?

Answer 29

The more units consumed, the less utility gained from them

Question 30

What are 3 reasons the marginal concept is useful in decision making?

Answer 30

1) Allows gvnmt to make incremental improvements to spending decisions
2) Allows firms to decide when to stop increasing production
3) Allows households to decide when to stop consumption and when to offer more labour

Question 31

What are 3 reasons the marginal concept isn’t useful in decision making?

Answer 31

1) Gvnmt need to make large changes too
2) Firms are unlikely to have the info needed to calculate values ex ante, so only can ex post
3) Households don’t have knowledge to process these decisions

Question 32

What does 1) ‘ex ante’ & 2) ‘ex post’ mean?

Answer 32

1) Before decision
2) After decision