MICRO - Unit 1

Question 1

What is a positive statement?

Answer 1

is something which can be measured and tested

Question 2

What is a normative statement?

Answer 2

is an opinion

Question 3

What is a need ?

Answer 3

something that humans require to survive

Question 4

What is a want?

Answer 4

something which isn’t essential for survival but people feel that it would improve their standard of living.

Question 5

What is scarcity?

Answer 5

the lack of resources

Question 6

What is a free market economy?

Answer 6

is one where firms decide what goods and services to produce with limited intervention from the government.

Question 7

What are the 4 factors of production?

Answer 7

• Land
• Labour
• Enterprise
• Capital

Question 8

What is meant by land?

Answer 8

the natural resources which are available for production e.g wood

Question 9

What is meant by labour?

Answer 9

the human input into the production process

Question 10

What is meant by capital?

Answer 10

goods used in the supply of other products e.g. tech, machines

Question 11

What is meant by enterprise?

Answer 11

entrepreneurs which organise the factors of production and take risks

Question 12

What is human capital?

Answer 12

the value of a worker

Question 13

What is economic welfare?

Answer 13

refers to the standard of living or general well being of individuals in society

Question 14

What is opportunity cost?

Answer 14

the benefit of the lost of the next best alternative when making a choice

Question 15

What are trade-offs?

Answer 15

arises when having more of one thing which results in having less of another

Question 16

What is an economic good?

Answer 16

is a good that has an opportunity cost in consumption because it uses up sacre resources

Question 17

What is a free good?

Answer 17

is a good that doesn’t have an opportunity cost in consumption because no sacre resources are used

Question 18

Name 2 examples of a free good and why ?

Answer 18

Air and sunlight because they are unlimited in there supply and availability

Question 19

What can a PPC and PPF be used to show ?

Answer 19

show the different combinations of outputs of two products

Question 20

What does a PPC show?

Answer 20

the problem of choosing how to use scarce resources when producing goods and services

Question 21

What does producing along the curve mean?

Answer 21

full use of resources

Question 22

What does producing underneath the curve mean?

Answer 22

inefficiency = under-use of resources

Question 23

Why is anywhere above the curve unobtainable?

Answer 23

not enough resources to produce that level of output

Question 24

What are trade-offs?

Answer 24

type of opportunity cost, the most prefered possible alternative. Sacrifice needed to make a certain product

Question 25

What are investment goods?

Answer 25

those that produce a stream of income in the future e.g machinery

Question 26

What are consumption goods?

Answer 26

those that produce a stream of income today e.g car

Question 27

What is allocatively efficient?

Answer 27

is when available resources are used to produce combination of goods and services that best matches a people's tastes and preferences

Question 28

What is allocatively efficient?

Answer 28

is when you cannot produce more of one good unless you produce less of the other

Question 29

What causes a shift outwards on a PPC?

Answer 29

technological improvements - increased productivity discovery of new resources e.g oil improvements in education and training - more productive workforce changes in working population - immigration

Question 30

What causes a shift inwards on a PPC?

Answer 30

disasters e.g earthquakes - destroy resources wars global warming / climate change - loss of farmland, rising sea levels and extreme weather prolonged recession - permanent loss of productive capacity if business closes/ loss of worker's skills

Question 31

What are the useful concepts of opportunity costs?

Answer 31

suggests what, how and whom for should be produced | how to scarce resources e.g government spending