Microeconomic Questions Flashcards
(28 cards)
Use an example to explain the difference between positive and normative statements
Positive = statement of fact (objective), normative = statement of opinion (subjective)
Use an example to explain the concept of opportunity cost
The opportunity cost of buying a Cadbury dairy milk bar is buying a Galaxy bar
Draw a PPF diagram and use it to illustrate the concept of opportunity cost
Draw a PPF diagram and use it to illustrate the concept of opportunity cost – moving from one point, to another point, on the PPF
Define the economic problem
Infinite wants but scarce resources = choices have to be made
Provide an example of each of the 4 FoP
Land = oil, labour = teacher, capital = sewing machine, entrepreneur = Mark Zuckerberg
What does the word ‘marginal’ mean?
One more
Define the term ‘demand’
Demand is the amount of a product or service that customers are willing and able to pay for at a given time
Explain 2 factors that would shift the demand curve
population + income
Define the term ‘supply’
Supply is the amount of a product or service that producers are willing and able to supply for at a given time
Explain 2 factors that would shift the supply curve
Costs of production, productivity
What is meant by the term ‘market equilibrium’ (a.k.a. market clearing price)
Demand = Supply
Identify the formulas for i) PED ii) PES iii) YED iv) XED
Identify the formulas for i) PED = % change Qd / % change P ii) PES = % change Qs / % change P iii) YED = % change Qd / % change Y iv) XED = % change Qd (X) / % change P (Y)
Identify 2 factors that affect PED
Number of substitutes + width of market definition
Identify 2 factors that affect PES
Spare capacity + perishability
Identify 2 goods that are in joint demand (compliments)
Footballs and football boots
Identify 2 goods that are in competitive demand (substitutes)
Coke and Pepsi
Use an example to explain the concept of joint supply
Increase in supply of lamb = increase in supply of wool
What is the difference between production and productivity
Production = turning inputs into outputs… Productivity = the efficiency of production
Identify the formula for labour productivity
Output / units of labour
Provide 2 benefits that arise through the division of labour
Increase in productivity + improvement in quality
Provide 1 drawback to the division of labour
Jobs can become repetitive so quality may suffer
Use an example to illustrate the difference between fixed costs and variable costs
Fixed costs = rent, variable costs = raw materials
Identify the formula for total revenue
TR = P x Q
Identify the formula for profit
Profit = TR - TC
