Topic 27 - Topic 30

Question 1

What is an economy?

Answer 1

The production, distribution and consumption of goods and services in a country is referred to as an economy.

Question 2

What is an economic system?

Answer 2

The way that a country uses its factors of production to produce and distribute goods and services is known as an economic system.

Question 3

What is a centrally planned economy?

Answer 3

The government of a country makes all the decisions about the production of goods and services in this type of economy.
• Firms that provide goods and services are controlled by the government.
• The citizens of the country have very little involvement in business.
• Personal tax rates may be higher due to a higher level of public services.
• Examples: Cuba, North Korea, Iran

Question 4

What is a free enterprise of free market economy?

Answer 4

In this type of economy, the citizens of a country are free to set up businesses in any area they like, provided they stay within the law, with very little interference from the government. The USA is an example of a free enterprise economy.

Question 5

What is a mixed economy?

Answer 5

A mixed economy is a combination of the first of the above two economies. In a mixed economy, the production of goods and services is shared between government and business. This means that in most areas, citizens are free to set up businesses to produce goods and services provided they stay within the law. In some areas the government will control an area of business, either by issuing licences, for example a licence to operate a radio station or mobile phone network. Ireland is an example of a mixed economy.

Question 6

Name the three sectors that are responsible for the production of goods and services

Answer 6

• Public sector
• Private sector
• Voluntary sector

Question 7

What is the public sector?

Answer 7

The public sector is the part of the economy where the government provides services to the citizens of the country, for example civil servants, teachers and council workers.

Question 8

What is the private sector?

Answer 8

People who are not employed by the state are said to work in the private sector, for example engineers, carpenters, accountants etc. The private sector refers to businesses that are owned and operated by private individuals.

Question 9

What is the voluntary sector?

Answer 9

The Voluntary Sector (Third Sector) comprises of all the charities, social enterprises and cultural enterprises in the country. They are independent of the government but may receive funding in the form of a grant or subsidy to help them with their work.

Question 10

What is the law of diminishing marginal utility?

Answer 10

There is a limit to how much of a product or service a consumer will purchase, since the more of an item we purchase, the less satisfaction we get from it. For example, if you own an ice cream shop, you will notice that most of your customers will purchase one ice cream, and maybe a few will purchase two. That is because people will have had enough after one and will not feel like another one so soon. This concept is known as then law of diminishing marginal utility.

Question 11

What is demand?

Answer 11

Demand is defined as the number of units of a particular product or service that consumers are willing to purchase at a particular price.

Question 12

What is individual demand

Answer 12

Individual demand is the quantity of a product or service that one consumer is prepared to purchase at a particular price.

Question 13

What is market demand?

Answer 13

Market demand is the total quantity of a product or service that all consumers in a particular place (market) are prepared to purchase at a particular price.

Question 14

List factors that affect the demand curve

Answer 14

• A change in the price or feature of a substitute good or service.
• A change in price of a complementary good or service
• Advertising and promotion
• Tastes and fashions
• Government action
• Unexpected factors
• Changes in Income

Question 15

Factors that affect the supply curve

Answer 15

• Changes to the prices of substitute goods and complementary goods.
• Costs of production
• Government action
• Technology
• Competition
• Unforeseen events

Question 16

How does the government get money(revenue)

Answer 16

• Income tax
• Value Added Tax
• Deposit Interest Retention Tax
• Custom duties
• Universal Social Charge
• Capital gains tax
• Capital acquisitions tax
• Eu grants
• Sale of semi-state bodies
• Dividends from semi-state companies

Question 17

Current income for the government is day-to-day or regular income, such as income tax.

Answer 17

Capital income for the government is long-term or once-off income, such as EU grants.

Question 18

What is the national budget?

Answer 18

The national budget is a document that gives a detailed breakdown of government income and expenditure for the next year.

Question 19

How does the government deal with a budget deficit?

Answer 19

• Borrow additional money required.
• Increase some taxes, for example VAT or income tax.
• Ask the EU for additional money.
• Sell a semi-state company.

Question 20

How does the government deal with a budget surplus?

Answer 20

• Pay off some of Ireland’s national debt
• Reduce some taxes.
• Spend more on social welfare
• Hire extra state paid staff, such as nurses, doctors and teachers.

Question 21

What is the financial perspective of taxation?

Answer 21

• To provide income for the government to help finance the running of the country. For example, taxation can provide money for education, health, social protection etc.
• To help promote the sale of Irish-produced goods and services. This can be done by taxing goods coming in from non-EU countries, thereby making them more expensive.
• To help certain industries by reducing the VAT rates for their goods and services.
• To encourage people to buy more goods and services, thereby creating more Irish jobs.

Question 22

What is the social perspective of taxation?

Answer 22

• To try to improve people’s health by taxing goods such as cigarettes, alcohol and sugary foods.
• To provide money that the government can use to improve social services, such as healthcare and education.
• To provide money that the government can give to local authorities to improve amenities in their area, particularly in deprived areas., so that everyone in the country have the same opportunities.
• To help protect the environment by imposing taxes on certain fuels and other materials that damage the environment.
• To discourage people from using products that damage the environment.

Question 23

What is the legal perspective of taxation

Answer 23

• The law requires all citizens of the country to pay their fair share of taxes. Those that do not will face fines and penalties.
• Certain groups of people are responsible by law for collecting taxes on behalf of the government and forwarding this money to the Revenue Commissioners. For example, employers must charge and collect income tax.
• The money collected from taxation is used to keep law and order in the country. Prisons, Gardai, the courts etc are paid using income collected from taxation.

Question 24

What is the ethical perspective of taxation?

Answer 24

• To help redistribute income in a fairer way by taxing high earners more than lower earners and then using this money to provide services and benefits to those on low incomes.
• To raise money for the Department of Employment Affairs and Social Protection that can be used to support the poor, disabled and retired citizens of the country.