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A Level Economics > Slatman Theme 1 > Flashcards

Slatman Theme 1 Flashcards

(68 cards)

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1
Q

Why is rent expensive

A

Limited housing supply - demand exceeds supply in popular areas
- high property prices - expensive for landlords to buy the property
- High living costs - landlords increase the price to cover these costs

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2
Q

What is a normative statement?

A

A subjective statement

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3
Q

What is a positive statement?

A

Based on evidence e.g “it will lead to a rise in demand”

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4
Q

What does a PPF show?

A

A PPF shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully exploited

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5
Q

What type of resources are available?

A

(Cell)
Land resources
Capital resources - production facilities e.g tractors
Labour - workers
Enterprise - entrepreneurs

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6
Q

How can you increase the PPF?

A

By increasing the land resources, labour resources, capital resources, or enterprise resources

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7
Q

How would you increase the land resource exploitment?

A

Drilling more oil, more farms, mining

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8
Q

How do you increase your labour resources?

A

Give more training bonuses to encourage better work, increase immigration, bring in younger employees

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9
Q

How would you increase your capital resources?

A

Use artificial intelligence, investment

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10
Q

How would you increase your enterprise?

A

Increased investment in education like universities

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11
Q

What would cause the PPF to move inwards?

A
  • Land resources - a reduction in the production of oil, climate change (extreme weather)
  • Labour resources - immigration laws made stricter, lack of attention to staff training, emigration (people moving away so losing highly skilled workers), constant strikes
  • Capital resources - technology stops working/machines break, factories leave the UK, rise in resource price (firms can’t afford the new technology)
  • Enterprise resources - lack of education investment, emigration
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12
Q

What is division of labour?

A

Specialisation of labour into separate tasks
This insures higher productivity per worker

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13
Q

Productivity definition

A

Control your inputs in maximise your outputs

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14
Q

Advantages of division of labour

A
  • higher quality of goods and services
  • quicker as specialists know exactly what to do so less time is wasted
  • Staff get better and more efficient
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15
Q

Disadvantages of division of labour

A
  • if specialist is absent itcauses issues as no one else can perform their role
  • higher wages to be paid
  • Hard to replace
  • Staff can lose motivation
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16
Q

Absolute advantage definition

A

Being able to produce more of something than another country (assuming both have the same amount of resources)

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17
Q

Comparative advantage definition

A

Be able to produce something at a much lower opportunity cost than another country

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18
Q

How would you workout opportunity cost for media if the resources are mechanics and media

A

Mechanics / media gives u media
Whoever has the lowest opportunity cost has the comparative advantage

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19
Q

What are the functions of money?

A

A medium of exchange
A measure of value (price tags)
A store of value (weekly wages)
A method of settling debts

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20
Q

What did Karl Marx believe?

A

he was against the idea of capitalism and capitalists controlling the capital
He believed they were motivated solely by profits
They pay poor wages
The rich get richer and the poor get poorer
And he believed it was better to share the wealth equally

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21
Q

Why was marx right and wrong?

A

Why the was right:
Lots of people in poverty
The gap between rich and poor is increased

Why he was wrong:
Capitalists take the risk so they deserve the reward
There is a minimum wage, so they get paid fairly now
Consumers benefit from increase profit

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22
Q

What did Adam Smith believe?

A

The wealth of nations
Self interest - everyone is benefiting from each other’s self interest
Circular flow of income
Risk and reward
Trade leaves us all better off
He was a complete capitalist

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23
Q

Why was Adam Smith right?

A

The market only produces what’s wanted - no waste
Encourages trade
Firms are efficient (lower cost)
Lots of innovation and new products

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24
Q

Why was Adam Smith wrong?

A

One person/firm controls everything
Cuts off the poor
Encourages demerit goods

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25
What did Hayek believe?
Only buyers and sellers understand the market The government shouldn’t intervene with the market
26
What is the negative impact on the economy of the government introducing a minimum wage?
The cost for a business increases so price of product increases so customer finds alternative goods for lower price in another country
27
What is a free-market?
Buyers and sellers decide how the market works
28
What is a centralised economy?
The government decide on production and distribute it
29
What is a mixed economy?
An economy which has some government intervention
30
How much competition is in a free-market economy, a command economy, and a mixed economy
Free M - some Command - none Mixed economy - some
31
How many demerit goods are in a market economy, command economy and mixed economy?
FM - some Command - none Mixed - some
32
Negatives of a command economy
Poor efficiency / no strive for quality No competition - so poor quality and shortages No entrepreneurs No profit incentive so no innovations, so the economy will struggle to grow
33
What is market failure
When the market fails to allocate resources affectively
34
What are negative externalities
When a third-party is negatively affected by a market transaction
35
What is the socially optimum point
The money that should’ve been spent to cover the negative externalities
36
What are the negative externalities of a housing estate?
Increased traffic pollution and less job opportunities
37
What is a positive externality?
A product which has a positive impact on the third-party
38
Examples of positive externalities for an electric car
Reduce your carbon emission, which will be beneficial to the people around you
39
What are subsidies
Subsidies refer to direct payments to the government provide businesses to offset some of their operating costs
40
What are the benefits for giving subsidies to public transport firms?
Provides people with education Reduced congestion and carbon footprint
41
What are the negatives for giving subsidies to public transport firms?
Increased tax having to be paid to cover costs People will use the subsidy, even if they don’t need it Less money spent on other essentials like the NHS (opportunity cost) Produces become reliant on subsidies Negative externalities of increased supply
42
Positives of a command economy
Every one is equal - equal wages There are many public goods available as they are not profit driven Low unemployment Less demerit goods
43
Reasons for providing subsidies for public transport
Provides more people with a way to school Reduced congestion and carbon footprint Lower prices so more sales
44
Cons of paying subsidies
Producers can become “subsidy dependent” Subsidies can distort resource allocation. Subsidies can lead to excess production / surpluses. Environmental risks from excessive production Opportunity cost as less money spent on other essentials Increased tax having to be paid to cover costs
45
What is maximum pricing
When a price is set which the market will not be allowed to go above
46
Pros of max pricing
More affordable for low income consumers Consumers can spend more on other necessities Prevents unfair pricing More spending elsewhere as they have more money to spend
47
Against max pricing
Less profits for producer- so less reinvestment There will be shortages If firms get a lower price, there may be less incentive to supply the good, and the number of properties on the market declines Rich will get it even if they don’t need it
48
What is minimum pricing
Setting a floor price which the market is not allowed to go under
49
Reasons for minimum pricing
Effective means of reducing consumption Increased revenue
50
Cons of minimum pricing
There will be a surplus - incentive function for suppliers to supply more but incentive to consume less Less affordable
51
What is flax tax
Imposed on firms but can be passed on through higher prices
52
Why does a flat tax work
Should decrease the quantity consumed if intended, if inelastic though it won’t change consumption much
53
Reasons against sugar tax
Too many exceptions Impacts low income families the most
54
What is ad valerom
Percentage tax
55
What is carbon trading
A system of limiting carbon emissions through granting firms permits to emit a certain amount of carbon
56
Alternatives of using a pollution permit to reduce carbon emissions
Carbon tax
57
What is consumer surplus
A consumer surplus happens when the price that consumers pay for a product or service is less than the price they're willing to pay
58
What is a producer surplus
A producer surplus is the difference between the amount the producer is willing to supply and the actual amount they receive
59
Why is it important to know your producer and consumer surplus?
Because it allows you to see the welfare gain to society and how much better off we are to certain goods and services
60
What are the different methods of government intervention
Taxation Subsidies Max pricing Min pricing Carbon trading Carbon tax Making the good a public good ( avoids the free rider problem) Regulation Provision of information to reduce asymmetric information
61
Advantages and disadvantages of the provision of information to reduce market failure
+ consumer can act rationally - can be expensive to do so opportunity cost
62
Why is min pricing such an effective way of affecting the market
As prices are higher there is the rationing signal to consumers to reduce consumption.
63
What’s the purpose of the price mechanisms
To remove shortages and surpluses
64
What is regulatory capture
Regulatory capture occurs when regulatory agencies, intended to oversee and control businesses, become dominated by the interests of the industries they are supposed to regulate, prioritizing those interests over the public good
65
What is government failure
When government intervention leads to unintended consequences Example: Unintended consequences of a smoking ban: A ban on indoor smoking in the UK led to increased outdoor smoking, increased littering, and potentially increased exposure to harmful fumes.
66
Benefits of division of labour and evaluate each point
More productive workers - Eval :difficult and expensive to train replace and higher wages paid offsetting benefits of productivity. Dependency on these workers Repetition means workers become more skilled - Eval: boredom after repetitive work decreasing productivity in the long term
67
Positive externalities of production examples
In work training: these high skilled workers can be poached by other firms Investment in R&D : innovative tech can be copied by other firms
68
Positive externalities of consumption examples
Education: higher earnings so greater tax revenue for government to spend on economy

A Level Economics (9 decks)

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