Little Parts

Question 1

What is a planned economy

Answer 1

Economy where desicions on what and how to produce are made by the government

Question 2

Positives of a planned economy

Answer 2

Low unemployment
Affordable market prices
Economy focused on public welfare

Question 3

Negatives of a planned economy

Answer 3

Lack of innovation due to low incentive for profit

Shortages in supply- low flexibility

Question 4

What is a mixed economy

Answer 4

Economy where it mixes both freedom and govt intervention

Question 5

Pros of mixed economy

Answer 5

Increased efficiency and productivity due to market based incentives

Allows govt to set strategic priorities through economic policy

Question 6

Cons of mixed economy

Answer 6

Does not avoid market distorting effects of govt intervention

Finding right equilibrium hard , trade offs and crowding out

Question 7

What is a free economy

Answer 7

Where individuals and businesses have their own freedom to make economic decisions

Question 8

Pros of free economy

Answer 8

Choice increased
Incentives for efficiency and innovation

Question 9

Cons of a free economy

Answer 9

Limited govt intervention-abusive business practices

Question 10

Formula for marginal revenue

Answer 10

Change in total revenue/ change in quantity sold

Question 11

Minimum efficient scale

Answer 11

Lowest point on a cost curve at which a company can produce its product at a competitive price

Question 12

Demerit good

Answer 12

Good which has negative impact on consumer

Question 13

Merit good

Answer 13

Has a positive effect on the consumer

Question 14

Economic agents

Answer 14

Producers
Consumers
Government

Question 15

Role of economic agents

Answer 15

Producers- produce goods and services
Consumers- purchase goods and services
Govt- collect tax, spend on public services and regulate

Question 16

Consumer objective

Answer 16

Maximise satisfaction and utility

Question 17

Objectives of governments

Answer 17

Reducing DWL by responding to market failure of public goods,external costs and benefits and imperfect competition

Question 18

Objectives of producers

Answer 18

Maximise profits
Allocate resources
Social responsibility

Question 19

Allocative efficiency

Answer 19

Optimal distribution of goods and services taking into account different consumer preferences

P=mc

Question 20

Incentives within a economy

Answer 20

Quality incentives
Price incentives
Tax incentives

Question 21

Joint demand

Answer 21

Ink and printers, goods that complement each other in demand

Question 22

Composite demand

Answer 22

Exists where goods or services have more than one use.

An increase demand for one product leads to fall in supply of another

E.g oil for plastic demand increases leading to decrease in supply of oil for petrol

Question 23

Competitve demand

Answer 23

When demand increases for one good or service decreasing demand for another

Demand for rail increases leading to fall in demand for cars

Question 24

Joint supply

Answer 24

When two goods are produced together from the same origin

Beef and leather- cow being slaughtered can increase supply of both

Question 25

Competitve supply

Answer 25

Alternative products a firm could make with its resources For example a farmer could choose to produce carrots or potatoes with its machinery

Question 26

Market supply

Answer 26

How much producers in a collective market are willing to supply and sell their goods and services at different prices over a given period

Question 27

Individual supply

Answer 27

How a single firm is willing to price and quantify their goods over a given time period

Question 28

Define rationality

Answer 28

When agents make a choice they choose the option that seeks greatest utility

Question 29

Characteristics of a normative statement

Answer 29

Subjective Based on value judgement Cannot be tested true or false Ought, should and fair

Question 30

Positive statement characteristics

Answer 30

Can be proven What the economy is

Question 31

Trade off define

Answer 31

Weighing of two options to choose what you want

Question 32

Opportunity cost evaluate

Answer 32

Pros - recognising opportunity cost can allow you to make better decisions and reduce scarcity of choices Cons- difficult to identify OC as benefits of goods can’t easily be quantified

Question 33

Specialisation

Answer 33

Concentration of production on narrow range of goods and services Pros Wider range - choice AE Productivity Quality improvements Cons Finite resources Changes in tastes

Question 34

Accounting profit

Answer 34

Revenue minus the explicit costs like a depreciation

Question 35

Public good

Answer 35

Non excludability Non rivalry Zero mc

Question 36

Private good characteristics

Answer 36

Excludable Rivalry Opportunity cost generated

Question 37

Merit goods are typically

Answer 37

Under consumed Underproduced Contain positive externalities Demerit the opposite

Question 38

Principal agent problem

Answer 38

Agent is expected to act in the best interests of a principal but does not For example a shareholder may want to maximise profits however the manager doesn’t share the same idea

Question 39

Difference between a shift and a movement along a demand curve

Answer 39

Shift - factors other than price change the overall demand for the product Movement- price of product changes Extension- increase in demand Contraction- decrease in demand

Question 40

Economic good

Answer 40

A good with some benefit to society and an opportunity cost

Question 41

Moral hazard

Answer 41

Situation where a a firm or individual takes a risk knowing that someone bears the cost if it goes badly

Question 42

Free goods

Answer 42

Goods with zero opportunity cost such as air

Question 43

Evaluative points

Answer 43

Ceritus paribus Short and long run Elasticity Business objectives

Question 44

Marginal cost

Answer 44

Change in total cost / change in quantity produced

Question 45

Cost calculations

Answer 45

AC=TC/ number of units AVC= VC/ number of units

Question 46

DOL

Answer 46

Broken down of tasks upon specialisation Pros Higher productivity Lower prices Higher quality Cons Worker turnover - lower quality Demotivation of workers

Question 47

Marginal revenue

Answer 47

Change in revenue / change in output

Question 48

Causes to shift supply

Answer 48

Changes in technology Natural events Changes in price to produce

Question 49

Causes of shifts in demand

Answer 49

Income Trends or tastes Price of substitutes