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A-Level Economics > Intro To Microeconomics > Flashcards

Intro To Microeconomics Flashcards

(64 cards)

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1
Q

Interest Rate

A

Cost of borrowing money
Return on saving

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2
Q

Inflation

A

Sustained rise in general price level

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3
Q

Disinflation

A

Sustained fall in general price level

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4
Q

Economics

A

Question of Scarcity
The allocation of limited resources for unlimited wants

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5
Q

‘Need’

A

Essential
e.g. water, food, clothes, shelter

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6
Q

Moral Hazard

A

Person takes more risks as someone else bears the cost of those risks

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7
Q

Economic Problem

A

Problem of Scarcity
-How to best use limited resources to satisfy the unlimited wants of people
-How to best allocate scarce resources among alternative uses
-Relates to infinite wants and finite resources

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8
Q

Opportunity Cost

A

The next best alternative being given up

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9
Q

Allocation of Resources

A

Choice between different uses of resources
Samuelson’s 3 Question’s ; What?, Who?, How?

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10
Q

Macroeconomics

A

Entire economy
All businesses
All consumers

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11
Q

Microeconomics

A

Individual firms
Industry’s Individual consumers

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12
Q

Free Goods

A

Goods with infinite supply and zero opportunity cost
e.g. air, sea, sunlight, rainwater

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13
Q

Economic Goods

A

Scarce and an opportunity cost
e.g. any goods and services sold in a market

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14
Q

Normative Statements

A

Opinionated statements, subjective, value judgements

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15
Q

Normative Statements

A

Opinionated statements, subjective, value judgements

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16
Q

Positive Statements

A

Factual, Can be tested and proven

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17
Q

Sustainability

A

Requires an economy to be able to o achieve growth now without hampering the ability to grow in the future

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18
Q

3 Types of Sustainability

A

Social
Environmental
Economic

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19
Q

‘Ceterus Paribus’

A

Assumption that all other things being equal / remaining a constant, Control variable, used for simplifying economic relationships

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20
Q

Consumers assumed to…

A

Maximise their satisfaction

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21
Q

Producers / Firms are expected to…

A

maximise profits

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22
Q

Governments are supposed to…

A

Represent the people and act in their best interests (social welfare)

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23
Q

Interdependence

A

This means the economic actions of one group are likely to impact another

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24
Q

Factors of Production

A

The resources used by firms to produce goods + services

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25
Resources
CELL Capital Enterprise Land Labour
26
‘Land’
The natural resources available for production in an economy Reward is ‘rent’
27
Labour
Human services (Human Capital), (Physical or intellectual)
28
Enterprise
Involves taking a risk and organising the other 3 factors of production to create the final goods and services
29
Capital
Human made resources used to make other goods and services
30
Types of capital
MERC Machinery Equipment Robots Computers
31
Externalities
The costs and benefits to a third party created by economic agents when undertaking their activities
32
Market Mechanism
Where decisions on price and quantity are based on supply and demand
33
3 Conditions needed for a market:
Individual buyers and sellers Act on reference to their self interests Prices convey info to buyers and sellers
34
Demerit Good
Something deemed to be bad for society but it’s over-provided by the market
35
How long does it take for the impact of a decrease in interest rates to occur?
9-12 months to effect an economy 18-24 months to effect inflation
36
Consumer Sovereignty
The impact/influence consumers have on producers
37
Pure Monopolist
Single seller in a market which supplies market with 100% of the products
38
Legal Monopolist
Single seller with a 25+ % market share
39
Merit Goods
Goods & Services which are deemed to be good/benefical for society but often underprovided
40
Price Mechanism is
The forces of supply and demand to allocate resourcea and determine prices in a market economy
41
Price Mechanism's Functions are
Allocation Rationing Signalling Incentives
42
Factors of Production / Resources / Factor Input
C apital E nterprise L and L abour
43
Transition Economies
Previously a command / planned economy but now allowing more price mechanism to occur
44
Advantages of Planned Economy
-Lower inequality than free market -Prevent monopoly abuse
45
Disadvantages of Planned Economy
-Lack of choice of products -Less income after tax -Inefficient allocation of resources -Less incentive to work
46
Advantages of Free Market Economy
-Higher income after tax -Incentive to inovate, high quality -Lower prices -Higher economic growth
47
Disadvantages of Free Market Economy
-Businesses can exploit customers -Market dominated by few businesses, monoply's -Higher inequality than planned and mixed
48
Measure Economic Freedom through:
Rule of Law Limited Government Regulatory Efficiency Open Markets
49
Price Mechanism, Signalling
Prices adjust up or down to demonstrate where resources are required and where they are not
50
Price Mechanism, Allocation
Changing market prices allocate scarce resources among competing uses
51
Price Mechanism, Rationing
Higher market prices serve to ration scarce resources when market demand outstrips supply
52
Price Mechanism, Incentives
When the price of a product rises, quantity supplied increases as businesses respond
53
Different Economic Agents
Households Firms Governments
54
Households Objective
They wish to maximise their utility or personal satisfaction in consumption or working
55
Firms Objective
Maximise Profits, growth, sales or profit satisficing
56
Governments Objective
Maximise the welfare of the population, Full employment, Sustainable ecnomic growth, competitive marketplace
57
Profit Satisficing
A level of profit below profit maximisation that satisfies the needs of the owners of organisation
58
Production Possibilty Curve (PPC)
Shows the maximum output combinations of Consumer + Capital goods that an economy can possibly produce given existing resources and technology.
59
PPC Illustrates
-Opputunity cost -Concepts of Scarcity -Economic goods not being perfectly adaptable -Unemployment if Shift
60
Recession
Fall in real GDP for two conescutive quarters
61
Market Failure
When the free market mechanism fails to achieve allocative efficiency
62
PPC's concave shape
displays theory of diminishing returns
63
PPC / PPF can shift outward because
-New technology / innovations -Discovery of new resoursers -Improved training / education / healthcare
64

A-Level Economics (2 decks)

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