T1 - 1.1 Nature of Economics

Question 1

What are goods?

Answer 1

A tangible item that can be bought, sold and lent.

Question 2

What are services?

Answer 2

Non tangible items that provide a action of sort. For example - a train journey.

Question 3

What is Elasticity?

Answer 3

a change in behaviour based on a change in price/income

Question 4

What is a model?

Answer 4

A model is a theoretical concept that looks at how different variables interact

Question 5

What is a subsidy?

Answer 5

Alternative products offered at a lower price

Question 6

What is outsourcing?

Answer 6

getting labour from abroad

Question 7

What is ‘Ceteris paribus’

Answer 7

‘All other factors remain the same.’

Question 8

What are complementary goods?

Answer 8

Goods that are bought together. When demand falls for one, the demand falls for the other too. E.g. toothbrush and toothpaste

Question 9

What is a Sunk Cost?

Answer 9

Money that is wasted

Question 10

What is opportunity cost?

Answer 10

The cost of a foregone opportunity

Question 11

What is a positive statement?

Answer 11

A statement that can be proven using facts - objective

Question 12

What is a normative statement?

Answer 12

A statement that is based on judgement and opinions - subjective

Question 13

What is the Economic Problem?

Answer 13

There is not enough resources for everyone due to scarcity. So the government can’t produce as much benefit and utility.

Question 14

What is a government trade off?

Answer 14

E.g. The gov may need to focus on the older population rather than the younger.

Question 15

What is a business trade off?

Answer 15

E.g. a business may choose to be sustainable rather than maximise profits.

Question 16

Who are economic agents?

Answer 16

Individuals, firms and governments that partake in economic activity, the demand for and supply of goods and services.

Question 17

What is a free market?

Answer 17

A market with limited restriction from the government

Question 18

What is a command economy?

Answer 18

A market that is restricted by the government. E.g. PRNK

Question 19

What is a mixed economy?

Answer 19

A market with a balance of limited and restricted intervention from the government.

Question 20

Choice

Answer 20

The ability of a consumer or producer to decide which good, service or resource to purchase or provide from a range of possible options.

Question 21

What are the 4 factors of Production?

Answer 21

Land, Labour, Capital and Enterprise

Question 22

What is austerity?

Answer 22

the name used for government fiscal policy which is aimed at reducing a government’s deficit (or borrowing).

Question 23

What is the production possibility frontier?

Answer 23

The production possibility frontier (PPF) is a curve on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.
E.g. As the output of good X increases that of good Y decreases and vice versa.

Question 24

What is a capital good?

Answer 24

Goods that produce a stream of income in the future. E.g. machinery

Question 25

What is a consumption good?

Answer 25

Goods that produce an immediate benefit to the consumer. E.g. a car for personal use

Question 26

What is a consumer good?

Answer 26

Goods that you derive personal benefit from

Question 27

What is marginal?

Answer 27

The cost of adding on additional unit

Question 28

What is a movement?

Answer 28

A change in the combination of outputs due to price

Question 29

What is a shift?

Answer 29

An Increase/Decrease in the curve caused by FOP

Question 30

What is structural unemployment?

Answer 30

When the industry becomes obsolete, decline of the sector

Question 31

What is frictional unemployment?

Answer 31

time between moving jobs or time spent training for a new job

Question 32

What is cyclical unemployment?

Answer 32

Employment based on the economic cycle. E.g. the airline industry

Question 33

What is seasonal unemployment?

Answer 33

Employment depending on time of year. E.g. Farmer (Harvest)

Question 34

Examples of barriers?

Answer 34

Legislation, tariffs, quotas, embargoes ad protectionist measures.

Question 35

What is specialisation?

Answer 35

The process where a company or firm will focus their labour on a specific type of production.

Question 36

When does specialisation occur?

Answer 36

When economic units such as individuals, firms, regions or countries concentrate on producing specific goods or services.

Question 37

What is the division of labour?

Answer 37

Specialised use of workers in an organisation

Question 38

What is a bottleneck?

Answer 38

A point of congestion in a production system that slows or stops process

Question 39

What are bond markets?

Answer 39

The collective name given to all trades and issues of debt securities

Question 40

What are some problems with the division of labour?

Answer 40

- Work can be monotonous - Leads to issues with the workforce such as a high absenteeism and labour turnover.

Question 41

What is money?

Answer 41

- a medium of exchange - a store of value - a unit of account - a standard of deferred payment

Question 42

What are market forces?

Answer 42

SUPPLY and DEMAND - work together to determine what price and quantity of goods and service are supplied(market mechanism)

Question 43

What s competitive pricing?

Answer 43

Set the same price as competitors

Question 44

What is price penetration?

Answer 44

Low price to begin with, then build up the price as you establish a customer base

Question 45

What is price skimming?

Answer 45

High price of begin with, then reduce the price over time to capture more customers

Question 46

What is loss leader?

Answer 46

Customer goes to the store for the cheap item and buys more than intended

Question 47

What is meritocracy?

Answer 47

The best person gets the best job

Question 48

What is a demerit good?

Answer 48

A good that is deemed to be bad for society but is over provided by the market