Micro

Question 1

Microeconomics

Answer 1

Economic behaviour in the individual markets that make up the economy
Included individual consumers, markets and industries e.g. NHS, housing, food

Question 2

Macroeconomics

Answer 2

Explains how whole economy works; looks at aggregates rather than individual aspects 
Measuring economy as a whole-
GDP
Inflation 
Taxation 
Unemployment

Question 3

Economics is a social science

Answer 3

Relationships of individuals within a society

E.g. Customers buy firms supply in the economic market

Question 4

Economics

Answer 4

Study of social behaviour guiding in the allocation of scarce resources to meet needs and wants of the individual members of a given society
Study of scarcity

Question 5

Needs

Answer 5

Limited, necessary

Question 6

Wants

Answer 6

Limited supply

Question 7

Scarcity

Answer 7

When wants and needs are not satisfied therefore a choice has to be made
Economics look at how resources are allocated in a certain way
So it’s a study of choices

Ex of scarcity
NHS lacking funding because of government making choices

Question 8

Choices

Answer 8

When resources are scarce choices have to be made

Criteria of choices: maximise economic welfare

Question 9

Goods

Answer 9

Tangible products

Question 10

Economic activity

Answer 10

Central purpose of economic activity is production of goods and services to satisfy needs and wants therefore improve/maximise economic welfare

Question 11

Production

Answer 11

Conversion of raw materials into products

Process of converting inputs into outputs

Question 12

Factors of production

Answer 12

C apital - money raised to operate business

E nterprise - risk takers who organise other products; thinking, ideas

L and - where business is based; natural resources extracted from environment

L abour - the human input: skills, abilities

Question 13

Services

Answer 13

Intangible

Question 14

Free goods

Answer 14

Goods that are freely available at no cost and availability is unlimited

Question 15

Economic goods

Answer 15

Goods which must be produced using finite resources which are in limited supply

Question 16

Market failure

Answer 16

When economic welfare isn’t maximised

Goods are either over or under produced

Question 17

Economic welfare

Answer 17

Economic wellbeing of an individual/group within a society/economy

Question 18

Fundamental economic problem

Answer 18

How to make the best decisions about the allocation of scarce resources
In order to improve and maximise economic wellbeing

Question 19

Opportunity cost

Answer 19

Next best alternative

Question 20

Rational decision making

Answer 20

The assumption that people choose the best option based on their own self interest or which maximises benefit to them

Question 21

Countering rational decision making

Answer 21

Making irrational choices when buying things
When in a hurry
On impulse
Addictions
Designer items
Short and long term decisions
Long term - retirement

Question 22

Production possibility curve

Answer 22

Shows different possible combinations of 2 goods that can be produced using available resources
Clearly illustrates importance of opportunity cost
Full employment of available resources
All points on curve are points of maximum productive efficiency

Question 23

Economic retraction

Answer 23

Recession

Question 24

Inside production possibility frontier curve

Answer 24

This point would shown that the economy (productivity) is inefficient because there is an underutilisation of resources

Question 25

Productive efficiency

Answer 25

Measure of efficiency Occurs when output is maximised from available inputs For economy as a whole occurs when it's impossible to produce more of one good without producing less of the other For individual firms occurs when available total costs of production are minimised

Question 26

Allocative efficiency

Answer 26

When economic resources are used to produce goods and services that best match people's preferences You can see allocative efficiency on a production possibility diagram but not how it's maximised

Question 27

Positive statement

Answer 27

Objective statements omitting any opinion that deal with matters of fact Based on theory not emotion, often expressed in the form of a hypothesis that can be analysed and evaluated Either correct or incorrect Question how things actually are: based on solid theory which is based on numbers which is based on the economic principles

Question 28

Normative statements

Answer 28

Subjective; often without a basis in fact or theory | Based on your opinion and values

Question 29

Allocative mechanism

Answer 29

Economic systems are the institutional arrangements employed to ensure scarce resources are used effectively to maximise satisfaction

Question 30

Planned/ command economy

Answer 30

Government decides everything | E.g. Cuba, china,

Question 31

Market/ price led economy

Answer 31

(Doesn't actually exist) Private individuals and companies make the majority of decisions about what goods and services are produced (If supply is meeting demand then everything is fine) Often referred to as free trade: the price people are prepared to pay determines what suppliers are prepared to supply Government involvement is minimal

Question 32

Mixed economy

Answer 32

Closer to free end of spectrum Private and individual businesses provide some goods and services while the government will organise the provision of others through the public sector

Question 33

Law of demand

Answer 33

Quantity or goods/ services that consumers are willing and able to buy at a given time period

Question 34

Effective demand | Must be able and willing to pay

Answer 34

Effective because it's only when consumers want to buy (backed up by ability to pay) does demand actually have an impact on the market Consumers must have sufficient purchasing power to have any effect on the allocation of scarce resources

Question 35

Ceteris paribus assumption

Answer 35

Other factors remain the same but there is an inverse relationship between price of goods and demand As prices rise there will be a contraction of demand As prices fall there will be an expansion in demand

Question 36

Movement

Answer 36

When PRICE of good changes

Question 37

Shift in demand curve

Answer 37

When any other factor OTHER THAN price of the good itself changes

Question 38

Shift to right

Answer 38

Increase in demand

Question 39

Shift to left

Answer 39

Decrease in demand

Question 40

Conditions of demand

Answer 40

``` P opulation A dvertising S ubstitutes I ncome F ashion/ trends I nterest rates C omplementary goods ```

Question 41

Expansion in demand

Answer 41

Prices fall

Question 42

Contraction in demand

Answer 42

Prices rise

Question 43

Substitutes

Answer 43

Goods in competitive demand and act as replacements for another product

Question 44

Joint/ complementary demand

Answer 44

When you need one product in conjunction with another product E.g. DVD players & DVD's, printers & ink cartridges

Question 45

Competitive demand

Answer 45

As price increases so does demand

Question 46

Normal goods

Answer 46

Items where when income increases so does demand | E.g. Nike & adidas- goods you want to buy

Question 47

Inferior goods

Answer 47

Items where increase in income there's a decrease in demand