Unit 1 Flashcards
(55 cards)
1
Q
Compare, using examples, the difference between a want and a need. (3)
A
- A need is something that is required for survival whereas a want is something that makes life more pleasant (1)
- We have a finite amount of needs whereas we have unlimited wants (1)
- Needs include food/water/shelter whereas wants include games console/new mobile phone/designer clothes (1)
2
Q
Compare a need with a want. (1)
A
A need is something that is required for survival whereas a want is something that makes life more pleasant (1)
3
Q
Describe the reasons for scarcity applying to all economies. (4)
A
- resources are limited (1)
- wants are unlimited (1)
- there will never be enough resources to satisfy all wants (1)
- therefore scarcity can never be solved by any country/economy (1)
4
Q
Explain why all economies face the basic economic problem. (4)
A
- our wants for goods and services are unlimited (1)
- resources are limited (1)
- this is caused because of human nature to be greedy (1)
- this affects all countries and economies both rich and poor (1)
5
Q
Explain why consumers have to make choices. (2)
A
- Consumers make choices because they have a limited income to buy all they would like (ID) Therefore they have to decide how to spend their income on what would give them the greatest utility (1)
- For example buying a new car or a new laptop (1)
6
Q
Explain why government have to make choices. (2)
A
- Governments make choices because they have limited tax revenue to do all they would wish to (ID) Therefore they have to choose how to spend their limited tax revenue on what would maximise the welfare of society (1)
- For example increase spending on the NHS or on Education (1)
7
Q
Describe, using at least one example, what is meant by resources. (2)
A
- Resources are the land, labour, capital and enterprise needed to produce goods and services (1)
- Resources are the factors of production (1)
8
Q
Describe the 4 factors of production. (4)
A
- Land: natural resources (1)
- Labour: physical and mental work of an individual to produce a good or service (1)
- Capital: man-made resources to produce goods and services (1)
- Enterprise: the decision making and risk taken by an entrepreneur to start businesses (1)
9
Q
Name the return to the factors of production (4)
A
- Land: Rent
- Labour: Wages
- Capital: Interest
- Enterprise: Profit
10
Q
Outline 3 reasons for an individual being occupationally immobile (3)
A
- lack of skills/qualifications (1)
- cost of retraining (1)
- being tied to a current contract (1)
11
Q
Define occupational mobility (1)
A
- occupational mobility is the ability of workers to change work skills/the ability of resources to change their use (1)
12
Q
Define geographical mobility (1)
A
- geographical mobility is the ability of labour/resources to move location (1)
13
Q
Explain the reason for firms having to make choices. (1)
A
- firms have limited resources (ID) therefore they have to produce products which have the highest profit (1)
14
Q
Define opportunity cost. (1)
A
- the sacrifice of the next best alternative foregone (1)
15
Q
Describe, using an example, what is meant by the term ‘opportunity cost’. (2)
A
- the sacrifice of the next best alternative foregone (1)
- If the choice is between a pink t-shirt and a blue tshirt, and you choose the pink t-shirt then the blue tshirt is the opportunity cost (1)
16
Q
Define the term interest rate. (1)
A
- the cost/price of borrowing (1)
17
Q
Suggest 2 possible reasons why individuals save (2)
A
- For a rainy day (emergency fund) (1)
- For retirement (1)
18
Q
Give examples of 2 ways to save which would gain interest. (2)
A
- Regular savings account (1)
- Instant access savings account (1)
19
Q
Identify 2 different types of saving. (2)
A
- Bank account (1)
- Credit union (1)
20
Q
Identify 2 methods of borrowing available to individuals. (2)
A
- Credit card (1)
- Overdraft (1)
21
Q
Describe the ways an individual may borrow. (3)
A
- Overdraft: where the bank allows you to withdraw more cash than you have in your account (1) up to an agreed limit/for a short period of time (DEV) (1).
- Bank loan − where you borrow from the bank and pay the loan back in instalments/with interest (1).
- Credit card − allows the cardholder to pay for goods and then pay the credit card company later (1).
22
Q
Explain the impact on an individual of taking out a mortgage. (4)
A
- the mortgage will have to be repaid (ID) therefore individuals will have less to spend of other things/have reduced discretionary income (EXP) (1) which could lower standard of living (DEV) (1) and if interest rates rise, this could be exacerbated (DEV) (1)
- if the mortgage payments are not paid (ID), individuals could lose their home (EXP) (1)
23
Q
Suggest 2 pieces of advice that a potential borrower might find useful before taking out a loan. (2)
A
- Do not borrow more than you can repay/make sure you can keep up with repayments (1).
- Compare rates of interest before borrowing (1).
24
Q
Other than changes in interest rates, outline 2 factors which might affect an individual’s willingness to borrow. (2)
A
- an individual’s financial circumstances (1)
- an individual’s employment status (1)
25
Define the term “disposable income”. (2)
- disposable income is income after deductions (1)
- eg income tax and national insurance contributions (1)
26
Explain the effects of a decrease in interest rates on borrowers. (3)
- decreases the cost of borrowing (ID) which means people have to pay back less (EXP) (1) and their standard of living might rise (DEV) (1)
- decreases the cost of borrowing (ID) therefore people may borrow more (EXP) (1)
27
Explain the effects on a borrower of an increase in interest rates. (3)
- Increases the cost of borrowing (ID) therefore people have to pay back more (EXP) (1).
- Increases the cost of borrowing (ID) therefore people will borrow less (EXP) (1).
- Increases the cost of buying a house (ID) therefore people are more likely to rent (EXP) (1).
28
Explain in what way an increase in income tax might affect the level of savings. (2)
- reduces disposable income (ID) therefore consumers have less to save (Exp) (1)
- reduces disposable income (ID) therefore people will dip into savings to fund regular spending (Exp) (1)
29
Explain reasons for an individual to prepare a budget for their personal finances. (2)
- to find out how much cash they will have left over (ID) so that they can make plans for future spending (EXP) (1)
- to compare actual with predicted spending (ID) to help them focus on not overspending (EXP) (1)
30
Suggest 2 ways in which households can plan for financial uncertainty. (2)
- Saving more
- Spending less
31
Define the term effective demand. (1)
- The quantity of a good or service that individuals are willing to buy at a particular price in a certain period of time (1)
32
Describe the law of demand (1/2)
- when the price of a product decreases then the demand for that product increases (1)
- when the price of a product increases then the demand for that product decreases (1)
33
Describe the reasons which cause demand curves to slope downward from left to right. (3)
- Income effect: as the price falls consumers are able to buy more with the same amount of income/as price falls real incomes rises (1).
- Substitution effect – as the price falls consumers switch from a more expensive alternative (1).
- Law of diminishing marginal utility – as we consume more of a good, the less satisfaction we get from each unit (1) so consumers are prepared to pay less for each additional unit (DEV) (1).
34
Outline factors, other than price, which might affect the demand for motorbikes. (2)
- Fashion and trends of motorbikes (1)
- Positive or negative advertisement of motorbikes (1)
35
Describe the factors which influence demand. (4)
- One factor which can influence demand is a change in income of individuals. If individuals have an increase in their income then their demand for goods and services will increase as they can now afford to buy more of something. (2)
- A change in fashion is when people change their behaviours towards something so if something is deemed to be “in fashion” then the demand for it will increase. (2)
36
Describe, using an example, what is meant by supply in the car industry. (2)
- for a car firm, this would be the number of cars they would be willing to produce and make available for sale (1)
- for example a car
37
Explain why a supply curve slopes upwards from left to right. (3)
- Profit motive: at higher prices producers get more profit per unit (ID) so they are willing to supply more (EXP) (1)
- New entrants to the market: higher prices make producing more profitable (ID) so new
producers might enter the market (EXP) (1)
- Cost of production: when output rises, a firm’s production costs may rise (ID)
therefore a higher price is needed to cover the extra cost (EXP) (1)
38
Outline 3 factors which can decrease the supply of strawberries. (3)
- poor weather (1)
- rise in costs of factors of production (for example fertiliser, labour) (1)
- no/fewer subsidies given to producers (1)
39
Describe 3 factors which could increase the supply of bicycles. (3)
- fall in costs of factors of production (eg raw materials, labour) as it is now cheaper to manufacture bicycles (1)
- improved technology in production which make production more efficient (1)
- subsidies to producers which reduce the costs of production (1)
40
Identify the effect each of the following determinants would have on the supply of potato crisps. (3)
(i) The UK experienced particularly hard frosts in early spring
(ii) Farmers developed a potato with higher resistance to pests
(iii) The price of herbs and flavourings increased
(i) decrease (1)
(ii) increase (1)
(iii) decrease (1)
41
Explain in what way a firm’s supply curve would be affected by an increase in
the price of ingredients. (2)
- A firm’s costs of production have increased (ID) therefore businesses cannot supply as much at the same price (1) and this will cause an inward shift of the supply curve (1)
42
Outline 3 determinants which might increase the supply of walking boots. (3)
- Newer and more efficient technology for
production (1)
- Subsidies for walking boots (1)
- Cost of production for walking boots decreased for example leather or labour (1)
43
Suggest 3 determinants which may result in a fall in the supply of mobile phones. (3)
- increase in cost of assembly worker wages (1)
- shortage of assembly workers (1)
- removal of subsidies for phone manufacturers (1)
44
Describe what is meant by the market for vegetables. (2)
- where buyers and sellers of vegetables come together (1) to agree a price and make an exchange (1)
45
Describe the process by which the price of a good settles at equilibrium
following: (4)
* a surplus
* a shortage.
- Surplus:
* supply is greater than demand (1)
* producers will reduce the price (by ‘having a sale’) (1)
* as price falls, demand increases (1)
* price falls continuously/in stages until it reaches equilibrium (1)
- Shortage:
* demand is greater than supply (1)
* consumers will ‘bid up’ the price (1)
* as price rises, demand falls (1)
* price rises continuously/in stages until it reaches equilibrium (1)
46
Define the term production. (1)
- the process of combining resources in order to create a good/service (1)
47
Describe, using examples, fixed costs and variable costs. (4)
- Fixed costs are costs that remain the same regardless of output (1) for example rent (1)
- Variable costs increase as output increases (1) for example wages, raw materials (1)
48
Define the term average cost. (1)
* total cost divided by output (1)
- AC = TC/no of units
49
Distinguish between fixed and variable costs. (1)
- Fixed costs are costs that remain the same regardless of output whereas variable costs increase as output increases (1)
50
Give an example of a variable cost for a car exporter. (1)
Tyres (1)
Rubber (1)
Exhausts (1)
Fuel for transporting cars (1)
Wages of assembly line workers (1)
Transaction costs (1)
Exchange rate costs (1)
51
Define what is meant by the term average revenue. (1)
- The amount of money received from selling one unit. (1)
- AR = TR/number sold (1)
52
Describe total revenue and average revenue. (2)
- Total revenue is the amount of money received by a firm from the sale of its products/a product (1)
- Average revenue is the amount of money received by the firm from the sale of one unit/sales per unit (1)
53
Total fixed cost - £30,000
Variable Cost - £0.75 per unit
Selling price = £2.25 per unit
Weekly Output/Sales - 100,000 boxes
Calculate the
(i) Average Fixed Cost
(ii) Total Variable Cost
(iii) Total Sales Revenue
(iv) Total Profit
(4)
(i) Average Fixed Cost
£30,000/100,000 = £0·30 (1)
(ii) Total Variable Cost
£0·75 x 100,000 = £75,000 (1)
(iii) Total Sales Revenue
£2·25 x 100,000 = 225,000 (1)
(iv) Total Profit
£225,000 – (£75,000 + £30,000) = £120,000 (1)
54
Other than the introduction of new technology, describe 2 ways in which a firm could increase its profit. (2)
A firm could increase its profits by increasing price or a successful advertising campaign (2)
55
Suggest 2 ways a firm might reduce its costs of production. (2)
- Sourcing cheaper supplies (1)
- Reducing wages (1)
