micro theme 1 1.1

Question 1

what is ceteris paribus

Answer 1

all things remain equal

Question 2

what is a positive statement

Answer 2

are objective statements that can be tested against facts/evidence to be declared either true or false

Question 3

normative statements

Answer 3

are subjective opinions or value judgements that cannot be tested against facts

they include ethical or moral judgements (words such as ought should better and worse)

Question 4

what is a need

Answer 4

something humas require to survive such as food warmth and shelter

Question 5

what is a want

Answer 5

is somethign that is not essential to survive but which people improves their standard of living, or econo,ic welfare such as a new car

Question 6

what is economic welfare

Answer 6

refers to the standard of living or general wellbeing (happiness) of individuals in society

Question 7

what are economic resources known as

Answer 7

the factors of production

Question 8

what are the factors of production (4)

Answer 8

land
labour
capital
enterprise

Question 9

what is land

Answer 9

earths natural resources (minerals, sea, water(

Question 10

what is labour

Answer 10

the people involved in production, work done by those who contribute to the production process

Question 11

what is capital

Answer 11

man made physical equipment used to make goods/services (machinery)

Question 12

what is enterprise

Answer 12

individuals willing to take a risk to make a profit

Question 13

what are the three main economic groups (economic agents)

Answer 13

consumers
producers
government

Question 14

what is interdependence

Answer 14

the decisions of each group contribute to how economies resources are used

Question 15

what is a producer/firm/suppliers aim

Answer 15

a person, company, or country that makes, grows or supplies goods and/or services. they have influence over the quantity, price and quality of goods they produce. THEY AIM TO MAXIMISE THEIR PROFITS

Question 16

what is the government

Answer 16

a political authority that decides how a country is run and manages it’s operations. They make and enforce rules within a country. they also spend money in the economy.

Question 17

what is interdependence of economic groups

Answer 17

many of the governments actions may influence price, quantity, or quality of a good or service. They aim to protect the consumer from exploitation by the producer

Question 18

what’s the basic economic problem

Answer 18

is that scarcity ie. economic resources are limited relative to society’s wants

Question 19

3 fundamental questions have to be considered when allocating resources:

Answer 19

1. What to produce and in what quantities?
2. How should goods and services be produced?
3. To whom should goods and services be allocated?

Question 20

what is opportunity cost

Answer 20

it refers to the value of the next best alternative forgone (given up) when a choice is made.

Question 21

what is productivity

Answer 21

is the rate at which factor inputs ( land, labour, capital, enterprise) are converted into outputs of goods and services

Question 22

what is productivity formula

Answer 22

total productivity= total output/ total amount of inputs used

Question 23

production possibility frontier (PPF) is also know as what

Answer 23

production possibility curve

Question 24

what does a production possibility curve depict

Answer 24

is a diagram which depicts the various combinations of two products that can be produced by an economy when all the available resources are fully and efficiently employed

Question 25

what does the points on the curve on a PPF show (about output) ## Footnote On the PPB (potential possibility boundary)

Answer 25

the points on a curve show the level of output if resources are used to their maximum potential. show resources being used efficiently

Question 26

why is peoples confidence in money important

Answer 26

otherwise it will lose its general acceptability of making transactions, once this happens it ceases to be money

Question 27

what are the functions of money (4)

Answer 27

* medium of exchange * measure of value * store of value * method of deferred payment

Question 28

what is a medium of exchange useful for

Answer 28

it enables the buying and selling of products. making exchange easier, money eliminates the need for barter.

Question 29

how is money a measure of value

Answer 29

it enables a value to be placed on products so they can be bought and sold with ease, money creates a unit of measure that enables comparisons between relative value of products

Question 30

how is a store of value a function of money

Answer 30

it is convenient way of storing wealth so that it can be spent at a later date. if money will tend to hold its value in the short term as long as inflation remains low

Question 31

how is a method of deffered payment a function of money

Answer 31

it enables borrowing and lending. this means that someone can borrow money in order to buy products rather than waiting until they've saved enough funds. a price is usually set -rate of interest

Question 32

what is division of labour

Answer 32

is a process whereby the production process/procedure is broken into a sequence of stages and workers are assigned a particular stage. ## Footnote by focussing on particular stages the workers become highly skilled at performing specialise tasks and thus more efficient at carrying out that task

Question 33

what are advantages of division labour (4)

Answer 33

* increase in productivity (higher output per worker) leading to economies a scale * Increase in efficiency of resources, helping to reduce the cost per unit of output as equipment can be used continuously on a production line * Effieciency also improved- no time is wasted in moving workers from one task to another. less time needed to train workers for a specific task * allows people to work to their natural strengths

Question 34

what are disadvantages of division labour (3)

Answer 34

* repetition creates monotony and boredom- leads to high turnover of staff increasing recruitment cost * breaking down production into different stages makes it easier to replace skilled workers with machines- leading to structural unemplyment * creates interdependence in production. if one set of workers go on strike it could halt production across the whole country.

Question 35

when does specialisation occur

Answer 35

when an individual, a firm, a region or a country concentrates on the production of a limited range of goods and services

Question 36

advantages of specialisation (3)

Answer 36

* increase in productivity * increase in efficiency * reduction in average cost

Question 37

disadvantages of specialisation (3)

Answer 37

* when demand for a good or service falls it can lead to structural unemployment * a country that specialises in the prouction and exports of minerals may face problems of resources depletion * the price goods are sold at- eg some countries face unfavourable exchange rates, selling their commodities at a lower price compared to goods purchased abroad.

Question 38

what are the 2 main allocative mechanisms

Answer 38

free market (market economy) command economy (planned economy)

Question 39

what is a free market

Answer 39

(market economy) economic system in which goods and services are purchased through the price mechanism and allocated based on supply and demand

Question 40

what is a command economy

Answer 40

(planned economy) an economic system in which government officials are planners allocate economic resources to firms and other productive enterprises

Question 41

what are the advantages of a free market economy (3)

Answer 41

* efficiency- only products of the best value will be in demand- incentive for firms to make goods in most efficient way possible * enterprise- rewards for good ideas can make entrepreneurs a lot of money * choice- the incentive for innovation can lead to an increase in choice for consumers

Question 42

what are the disadvantages of a free market economy (3)

Answer 42

* inequalities- free market can lead to a huge difference in income, not fair. In a completely free market those who cannot work receive no income * non-profitable goods may not be made- for example drugs to treat rare medical conditions may not be profitable so may not be made * monopolies- successful business can become the only supplier of a product- this market dominance can be abused

Question 43

what are the advantages of a command economy (4)

Answer 43

* governments can prevent inequality and redistribute income fairly * goods produced are beneficial to society * low unemployment- government can try to produce everyone with a job and a salary * governments can prevent monopolies from developing

Question 44

disadvantages of planned economy (3)

Answer 44

* poor decision making by government about what needs to be produced * restricted choice for consumers as firms will make what they are told to make * lack of risk taking, innovation and efficiency as incentive for making a profit limited

Question 45

what is a mixed economy

Answer 45

when both governments and markets play a part in allocating resources

Question 46

what are the government known as in a mixed economy

Answer 46

the public sector

Question 47

what are businesses that are privately owned called in a mixed economy

Answer 47

the private sector