Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

economics > micro theme 1 > Flashcards

micro theme 1 Flashcards

(64 cards)

Start Studying
1
Q

what are the advantages of the price mechanism?

A

It’s adjectively efficient
No time course, no one has paid to monitor it
The process is efficient prices low as possible
consumers have control over what produces make

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what are factors that shift demand? PACIFIC

A

population increases
advertisement, stimulates demand and reminds existing customers of the product
substitutes availability of substitutes affect demand
income, if income increases demand for a product will also increase
Fashion fashion trends will influence demand
income tax affects availability of disposable income
Compliments will affect demand

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is asymmetric information?

A

One party involved in the economic transaction, may know more than the other party and this causes market failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are positive statements?

A

They are very free judgement free, and can we test it to be true or false and are based on facts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is the role of positive statements?

A

positive statements are used to back up, normative judgements, positive statements influences economicdecision-making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what are normative statements?

A

Value judgements, non-scientific and therefore cannot be tested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what does YED greater than zero mean

A

Normal good why ED greater than zero means arise an income lead to rise the demand for the good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is productivity?

A

it measures how efficiently production inputs such as labour and capital are being used in an economy to produce a given level of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what are the advantages of specialisation and division of labour to a country?

A

Comparative advancing countries specialise in produced the goods where there was a little opportunity cost this increases output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what does YED smaller than zero mean

A

 inferior, good arising income to a full demand for the good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what does PED equals infinity?

A

Perfectly elastic toward force to 0, with price changes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the advantages of provisional information?

A

Hopes consumers act rationally
prevents market failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are the disadvantages of provision of information?

A

expensive for the government, it made her an opportunity cost. The government may not have all the information so they cannot inform consumers. Consumers may not listen to information due to irrational behaviour for example, warnings on cigarette packets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the disadvantages of a commander economy?

A

May not make consumer preferences, it limits, personal, freedom and democracy. Governments may not be fully informed on what to provide.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what are the advantages of a command economy?

A

Easier to coordinate resources it types of crisis government can compensate for market failure by reallocating resources, inequalities reduce welfare, maximise abusively powers prevented. The government works with full employment and workers. We usually have a job for life.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the division of labour?

A

Labour becomes specialised in a particular part of production process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

well, alternative used to consume behaviour

A
  • influence of other people other peoples behaviour, creative bias and consumers influences and habitual behaviour
  • Easier to stick to the status quo.
  • Consumer weakness at computation lack of self-control. Inability to weigh up pros and cons.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

how does the long run impact elasticity of suppky?

A

in the long run firms will increase supple by adding to their production capacity and therefore in the long run supply will become more elastic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

how does short run impact elasticity of supply?

A

firms may be able to increase their supply within existing capacity. this depends on the level of spare capacity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what is the formula for price elasticity of supply?

A

percentage change in supple/ percentage change in price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is consumer surplus?

A

extra amount of money consumers are willing to pay for a good or service above what they usually pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what is producer surplus?

A

the extra amount paid to producers above what they are willing to accept

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is an information gap?

A

when economic agents have imperfext knowledge and are unable to make informed decisions. this leads to misallocation of resources, people dont hlbuy things that would maximise their welfare.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what are the advantages of regulation?

A

ensures consideration of externalities
overcome market failure and maximise social welfare
prevents exploitation of consumers and keeps them fully informed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
what are the disadvantages of regulation?
laws may be expensive for the government to monitor firms may pass on these costs to consumets excessive regulation may reduce competition
26
what is the governments role in a mixed economy?
Private and public sectors co exists, part of the economy is free and part is managed by the government -govts role in a mixed economy: redistribute income through tax and benefits -stabilise economy: manage level of AD (through fiscal and monetary policy) -supplement and modify the price system: produce public and merit goods and limit demerit goods - create a framework of rules: prevent abuse of monopoly power, put in place consumer protection laws and safety standards to protect employees
27
what does YED >1 mean?
- luxury goods - the integer above one means the good is elastic
28
what is specialisation?
production of a limited range of goods, means that trade is essential as it is the only way to access all the resources available, this maximises amount of goods and services a country can produce adam smith proved it can improve labour productivity
29
what are public goods?
goods which are non-rivalrous and non-excludable - leads to the free rider problem : consumers refuse to pay valuation problem: producers may try and overcharge
30
what are the disadvantages of the free market?
- high levels on inequality and the rich will own the FoP - lack of merit goods and little control of demerit goods - resources wasted on unproductive expenses - may cause competition to disappear, causing monopolies which have high £ and decrease in quality - problem of externalities
31
what did fredrick hayek?
- state control of economy means a loss of freedom -argued that government intervention in the economy makes it worse
32
what did fredrick hayek?
- state control of economy means a loss of freedom -argued that government intervention in the economy makes it worse
33
what was adam smith’s ideas?
- free market economist - invisible hand of the market applies to the proce mechanism: prices are determined by spending holes - argued that knowledge is local - state should provide public goods that the market cant - smith recognised problems such as monopolies
34
what are the advantages of the free market economy?
-automatic system due to the free hand - consumer freedom of choice -high motivation, better incentives - firms are in competition, produce lowest cost ensuring productive efficiency - free market economies have higher growth
35
what are the advantages of the free market economy?
-automatic system due to the free hand - consumer freedom of choice -high motivation, better incentives - firms are in competition, produce lowest cost ensuring productive efficiency - free market economies have higher growth
36
what are the advantages of the free market economy?
-automatic system due to the free hand - consumer freedom of choice -high motivation, better incentives - firms are in competition, produce lowest cost ensuring productive efficiency - free market economies have higher growth
37
what does PED < 1 mean?
inelastic demand - quantity demanded changes by a smaller amount than price
38
what are the assumptions made in rational decision making?
-governments will aim to maximise social welfare - firms aim to maximise profit - consumers aim to maximise utility to gain maximum satisfaction
39
what is the formula for XED?
percentage change in QD of A/ percentage change in P of B
40
what is the formula for YED?
% change in QD/ % change in income
41
what is provision of information?
government corrects asymetric information by providing information to allow people to make decisions by forcing companies to provide information
42
what is ad valorem tax?
tax which accounts for a % of the price
42
what is a specific tax?
tax on a fixed amount for each unit of good or service sold
43
what is government failure?
when govt intervention in a market results in net welfare loss and a misallocation of resources
44
how is distortion of price signals a govt failure?
price signals are distorted and they keep some businesses which are insufficient and should find alternative use of their sources. a maximum price will cause excess demand a minimum price will cause excess supply
45
what are the assumptions made under rational decision making?
- consumers will aim to maximise utility - people will act with full and relevant information - ceterius parabis
46
what are the functions of money?
- medium of exchange - measure of value - a store of value - a method of deferred payment
47
what are the disadvantages of subsidies?
- govt spending has an opportunity cost - difficult to target as the exact size of the externality is unknown -can cause producers to become inefficient if the subsidies are in place for a long time - difficult to remove as producers will become reliant on them
48
what are the advantages of state provision of public goods?
corrects market failure and therefore improved social welfare - helps bring about equality and ensuring access to basic goods - benefits of the goods themselves
49
what are the advantages of indirect taxation?
market will now produce at the social optimum and social welfare will be maximised - raises govt revenue
50
what are the disadvantages of min/max price schemes
- creates a black market - distortion of price signals because there is excess demand or supply - therefore it is difficult for the government to know where to set prices
51
what are the disadvantages of indirect taxation?
- difficult to target the tax and its effect depends on where the tax is set: government has imperfect info - taxes are politically unpopular: govts may be unwilling to set them or set them too low - regressive, poor spend a larger proportion of their income on tax - leads to creation of a black market - conflict between raising revenue and solving the externality
52
what are the advantages of tradeable pollution permits?
- cap on no. of permits means that pollution is guaranteed to decrease. - raise revenue by selling permits and fining firms who exceed pollution limits - encourages use and investment into greener technology
53
what is the formula for % change?
new-original/ original x 100
54
what cross elasticity of demand do substitutes have?
POSITIVE. over 1. 1.29
55
What are the assumptions made when drawing a PPF curve?
- a fixed amount of resources are used - there’s a constant state of technology
56
What is the basic economic problem?
There are infinite ones, but finite factor resources
57
What are the advantages of regulation?
- ensures consideration of externalities - overcome market failure and maximise social welfare - prevents exploitation of consumers and keep them informed
58
What are the advantages of tradable pollution permits?
- caps the number of permits and guarantees pollution decreases - raise revenue by selling permits and fining firms who exceeded pollution limits - encourages usage and investment and green technology
59
What is economic efficiency?
Optimum use of scarce resources among competing ends and so that welfare is maximised overtime
60
What is the concept of diminishing marginal utility?
Successive unit of a good are consumed the utility gain from each extra unit will fall explaining the downward sloping demand curve
61
How does a long run impact the elasticity of supply?
Long road as a period of time in which the firm increases supply by adding to the production capacity
62
K
Time period in which firm is able to increase supply with it existing capacity?
63
What are the main functions of the price mechanism?
1) signalling: demonstrate where resources are required, prices fall and rise to reflect scarcities and surpluses 2) incentive function: through choices consumers send information to producers about changing nature of needs and wants decision making is decentralised Rationing function: prices ration scarce resources when demandd outstrips supply

economics (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions