nature of econ Flashcards

(43 cards)

1
Q

What is the basic economic problem

A

We have infinite wants and needs but have scarce resources

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2
Q

Define opportunity cost

A

Measure the cost of a choice made in terms of the next best alternative forgone

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3
Q

what does PPF stand for

A

Production Possibility Frontier

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4
Q

what does ppf mean

A

it is the maximum potential output of an economy producing a combination of 2 goods that can be produced with all the factor resources being used efficiently

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5
Q

what part of the ppc would you see opportunity cost

A

the top block, there will be less capital goods

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6
Q

what part of the ppc would you see gain

A

the side block, more consumer goods

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7
Q

what does a point not being on the actual curve mean

A

that resources are unemployed

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8
Q

what does it mean when the ppc shifts outwards

A

there’s economic growth (increase in gdp)

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9
Q

what does it mean when the ppc shifts inwards

A

there’s economic loss (decrease in gdp)

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10
Q

what causes the ppc to shift outwards

A

increasing size of production, increasing quality, increasing labor force by migration or training or more

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11
Q

what causes the ppc to shift inwards

A

mass loss of life such as natural disaster or pandemic, migration out of the country, less demand, less labor force ect

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12
Q

when the point is inside the curve rather than on the curve what does this mean

A

there is an insufficient use of resources which could be cause by unemployment, IDLE factories and more

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13
Q

what does a curved ppc show

A

that the opportunity cost rises as you move around the ppf because as resources get reallocated they become less suitable for the production of other goods

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14
Q

what does a straight line ppf show

A

that the output of capital good is directly proportional to the output of consumer goods

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15
Q

how to work out opportunity cost per unit

A

opportunity cost/gain

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16
Q

define specialization

A

when people businesses or countries focus on one particular activity leading to improved productivity

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17
Q

define division of labor

A

the breaking down of a big task into smaller segments which people specialize in

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18
Q

what is a benefit of division of labor to firms

A

they have more efficiency in production and this allows quicker production so more sales, decrease cost per unit which increase prices

19
Q

define productivity

A

how much of something that can be made with one unit of input

20
Q

what is free market economy

A

it is an economy where there is a low amount of government intervention and the private sector dominates and they are driven by the profit motive

21
Q

what is a mixed economy

A

it is an economy that has government intervention but also private ownership, mix of free economy and command economy

22
Q

what is a planned economy

A

the economy which a centralized government controls the means of production and determines outputs

23
Q

who is adam smith

A

he is the first official economist and he believed in free market and that there should be less state intervention

24
Q

what are economic actors

A

consumers, employers, employees ect…

25
advantages of free market competition
efficient allocation of scarce resources, competitive prices, increased consumer choice, capital investment
26
what does resource allocation occur through
price mechanism
27
what is price mechanism
fluctuating in prices and it determines everything and is a signal for firms to supply less or more
28
what is market mechanism
the decision of what is need to be produced
29
what determines what needs to be produced
consumers who are in sovereign (leading)
30
what is the role of the government
establish public goods, issues of money,. law legal ownership, protect property and ideas, step in if markets fail
31
drawbacks of free market
income and wealth inequality, businesses have monopoly power which leads to higher prices, negative environmental impact and under or non-provision of public goods and services
32
what is a positive statement
can be proven with data and is a fact
33
what is a normative statement
value based judgment and isn't based on data
34
what did karl marx believe
that equality is important as there is an unequal struggle between owners of capital and labor and that there is massive inequality in free market
35
what does karl marx say about all earning the same
that if we all earn the same there will be no incentive (use doctors and sales assistants as a comparative example)
36
benifit of karl max ideology
more equality of income, access to services not dependent on income and more strong public services
37
drawback of karl marx ideology
the state can suffer from information failures and corruption, problems in choosing prices or goods and services
38
what is the role of the state in a mixed economy
state owned industries and welfare state
39
what is public goods
causes market failure due to the problem of missing markets
40
what is non excludable
benifits derived from pure public goods cannot be confined sole to those who have paid for it (eg beaches, parks ect...)
41
what is non rivalrous
each partys enjoyments of using the goods or service doesn't diminish others enjoyment (broadcast, sun ect...)
42
what is non rejectable
it cannot be rejected by people
43
what is free rider
where non payers can enjoy the benefits of consumption at no financial cost of themselves