Why are the factors of production with example of each?
Capital - machinery
Enterprise - risk takers (investors)
Land - natural resources- farm,gold,oil
Labour- workforce- doctor, labourer
What are the returns from the factors of production
Capital- profit
Enterprise- interest
Land- rent
Labour- wages
What is a positive economic statement?
Factual statements that can be tested, verified or proven
“uk population is 67m”
What is a normative economic statement?
A value of judgement that can not be tested
“NHS shouldnt be free”
What is the division of labour?
When an entire task is split into sub tasks and every individual is assigned with a sub task on the benefit of expertise
What is specialisation within a country?
Country focuses on production in a certain good or service on the basis of competitive advantage
What are the advantages and disadvantages of the division of labour in organising production?
+improvement in productivity means better quality and more efficient workers
+ the output increases and the cost of production decreases so profit increases
-experts may ask for higher wages
-workers may become bored so motivation may decrease
-machinery can easily take job
What are the advantages and disadvantages of specialising in the production of goods and services to trade?
+improve their international competition
+more export revenue through trading
+more job creation so less unemployment
-if good is non renewable it may run out
-Vulnerability to demand changes
If global demand for the specialised product falls, income and employment may fall.
-Exposure to external shocks
Price volatility in global markets can cause instability.
-over reliance on imports from other countries
What is the definition of productivity
When a firm is producing at lowest average cost
What is the definition of demand
Various quantities consumers are willing to buy at different prices
What is the definition of quantity demand?
Certain quantities that consumers are willing and able to buy at a particular price
What are the reasons behind a negative slope of a demand curve!?
The concept of diminishing marginal utility
Substitution effect- when a price of a good rises people will switch to alternative so price goes down
Real income effect- if prices begin to go up affordability falls so qty bought decreases along with demand
What is individual vs market demand
individual- The quantity of a good that one consumer or one household is willing and able to buy at different prices, over a given time period.
Market -The total quantity of a good that all consumers in a market are willing and able to buy at different prices, over a given time period.
What factors affect demand
-price
-fashion
-taste
-population
-gender
-season
What are some exceptions to the law of demand?
1- peer pressure (adverts and buying without looking at price)
2-computational issue - ( buy one get one free but you only needed one )
3- habitual
4-emotional factors (panic buying
