Test 1

Question 1

non-renewable resources

Answer 1

resources that once used will never be replenished and will run out one day.

Question 2

renewable resources

Answer 2

resources that can be used and replaced/recreated. Won’t run out e.g. trees and water

Question 3

consumer goods

Answer 3

goods and services that are used by people to satisfy their needs and wants

Question 4

capital goods

Answer 4

goods that are used in the production of other goods, such as factories, offices, roads, machines, and equipment.

Question 5

Specialization

Answer 5

the production of a limited range of goods by an individual, firm or country in co-operation with others so that together a complete range of goods is produced

Question 6

division of labour

Answer 6

the specialization of workers who perform different tasks, at different stages of production, to make a good or service in co-operation with other workers.

Question 7

productivity

Answer 7

output per unit of input employed

Question 8

labour productivity

Answer 8

output per worker

Question 9

capital productivity

Answer 9

output per unit of capital employed

Question 10

Public sector

Answer 10

the state or government sector of the economy

Question 11

Private sector

Answer 11

the part of the economy owned by private individuals, firms, and charities

Question 12

Money

Answer 12

anything that is widely accepted as payment for goods and services performed or repayment of past debt.

Question 13

What are the functions money have to fulfill

Answer 13

• Medium of exchange
• Measure of value
• A store of value
• A method of deferred payment

Question 14

Barter economy

Answer 14

an economy that has no money rather exchange is conducted directly by swapping one good with another.

Question 15

Double-coincidence of wants

Answer 15

Where each party to the transaction wants what the other has to trade

Question 16

Assets

Answer 16

resources owned by a business or an economic entity

Question 17

Market mechanism

Answer 17

is what allocates resources through bringing together buyers and sellers who agree on a price for the product or resource being sold

Question 18

Consumer welfare

Answer 18

is the level of well-being or prosperity or living standards if an individual or group of individuals such as a country

Question 19

Utility

Answer 19

the satisfaction or benefit derived from consuming a good or a set of goods

Question 20

resources (econ)

Answer 20

Production inputs/factors of production

Question 21

productively inefficient

Answer 21

is where it is possible to produce more without an opportunity cost as resources aren’t fully and/or efficiently used up

Question 22

How do PPF curves shift outwards (increase production)?

Answer 22

Increase the quantity and/or the quality of their factors of production

Question 23

Demand (effective)

Answer 23

The quantity of a good or service consumers are willing and able to buy at a given price in a given time period

Question 24

Supply

Answer 24

The quantity of a good or service suppliers are willing to produce at a given price in a given time period

Question 25

What affects the supply curve?

Answer 25

``` PINTS WC : Productivity Indirect Tax No. Firms Technology Subsidy Weather Cost of production ```

Question 26

price mechanism

Answer 26

is the market and performs 4 functions: ARSI it ALLOCATES scarce resources by RATIONING excess demand/supply by signaling to suppliers that prices are either too high or too low, who have the incentive to change prices in hopes to maximize profit rates

Question 27

Consumer surplus

Answer 27

This is the difference between the price consumers are willing and able to pay for a good/service and what they actually do pay. This is the region under the demand curve and above the price line. This illustrates the extent of consumer welfare.

Question 28

Producer surplus

Answer 28

The difference between the price producers are willing and able to supply a good/service for and the price they actually receive. It is the region above the supply curve and under the price line. This illustrates the extent of producer welfare.

Question 29

Society surplus

Answer 29

society surplus is the sum of consumer and producer surplus (Consumer surplus + producer surplus)

Question 30

What are the factors affecting the elasticity of demand?

Answer 30

``` SPLAT: Substitutes Percentage of income Luxury/necessity Time period ```

Question 31

What affects the elasticity of supply?

Answer 31

``` Pssst : Production Lag Stocks Spare Capacity Substitutability of Factors of production Time ```

Question 32

production lag

Answer 32

Time lags occur in production, particularly in agriculture, when decisions about the quantity to be produced are made well ahead of the actual sale. Demand and the price may change in the interval, creating a problem for the producer.

Question 33

Spare Capacity

Answer 33

the ability of a supplier to produce more of a product that is now being produced

Question 34

bumper yields

Answer 34

occurs within agriculture where crop yields an unusually productive harvest. This may be due to good weather.

Question 35

XED (cross elasticity of demand)

Answer 35

measures the responsiveness of a good or service given a change in the price of another

Question 36

Substitutes

Answer 36

these are goods that can be replaced by another to satisfy a want. These have a positive XED with each other.

Question 37

Complements

Answer 37

These are goods that are purchased with other goods to satisfy a want. These have a negative XED.

Question 38

Buffer Stock

Answer 38

Buffer Stock is a policy used by the government to stabilize fluctuating commodity prices to protect both producers (if the price goes too low) and consumers (if the price goes too high)

Question 39

rational consumers

Answer 39

are assumed in behavioral economics to make decisions in accords to maximizing utility

Question 40

minimum price

Answer 40

The lowest price firm can charge on consumers. This is done to protect suppliers from low prices and therefore income, this also may lead to an expansion within the market. It may also be used to affect profitability where a non-garunteed minimum price is placed and profitability is affected by the business causing firms to exit the market/

Question 41

de-merit good

Answer 41

a good or service whose consumption is considered to be bad for you

Question 42

merit good

Answer 42

a good or service whose consumption is considered to be good for you

Question 43

indirect tax

Answer 43

a tax on expenditure that increases costs of production, this may be put in order to discourage the production of the good or service.

Question 44

ad valorem tax

Answer 44

a tax charged as a percentage of the good and so increases as price increases

Question 45

specific/unit tax

Answer 45

a tax charged on volume

Question 46

External cost

Answer 46

cost external to an exchange where a negative third part effect is invoked as a spillover from production or consumption. This is a cost that the price mechanism fails to take into account and is the difference between social and private costs.

Question 47

External Benefits

Answer 47

where third parties of a transaction are positively affected by a transaction and are where social benefits exceed private benefits

Question 48

Government Failure

Answer 48

is where government intervention in a market leads to a less efficient allocation of resources and greater welfare loss as he cost related to the government intervening is greater than the benefits derived

Question 49

Maximum price

Answer 49

This is the highest price firms are able to charge on consumers and is set in order to make a good/service more affordable to consumers.

Question 50

Information Gaps

Answer 50

where buyers or sellers do not have access to the information needed to make a fully informed decision

Question 51

Asymmetric information

Answer 51

where one group has superior information to other groups in a transaction.

Question 52

Subsidies

Answer 52

government payments/ grants to encourage the production of a good