1
Q
scarcity
A
unlimited wants in the face of limited resources
2
Q
finite resources
A
resources that are fixed in supply and whose quantity falls as they are consumed
3
Q
needs
A
necessary for human life
4
Q
wants
A
things people would like to consume
5
Q
wants
A
things people would like to consume
6
Q
free goods
A
not regarded as scarce eg. air
7
Q
economic goods
A
goods which are scarce and their consumption creates an opportunity cost
8
Q
what does the existence of scarcity do
A
forces people to make choices
9
Q
sustainable resources
A
resources which if managed carefully, can be replenished
10
Q
non-sustainable resources
A
resources will eventually run out as they cannot be replenished
11
Q
opportunity cost
A
value of the next best alternative forgone
12
Q
factors of production
A
inputs needed into the production of goods and services
13
Q
land - factor reward
A
natural resources - rent
14
Q
labour - factor reward
A
human input into the production process - wages
15
Q
capital
A
manufactured resources for the production of other goods - interest
16
Q
enterprise
A
organises the other factors of production and takes risks - profit
17
Q
economic questions
A
what to produce, how to produce, for whom to produce
18
Q
economic problem
A
how to satisfy unlimited wants with limited resources
19
Q
positive statement
A
objective statements that can be tested, amended or rejected with evidence
20
Q
normative statements
A
subjective value based judgement
21
Q
household choices
A
consumers who demand goods and services, and supply their labour
22
Q
firm choices
A
produce goods or services, and what and how to sell
23
Q
government choices
A
expenditure and taxation and regulation of markets
24
Q
evaluation of choices
A
irrational behaviour eg. charity
25
interdependence
where one group responds to the actions of another group, or when one group is impacted by the decisions of another
26
production possibility frontier
shows the maximum combinations of two goods or services that an economy can produce when all resources are fully and efficiently employed
27
how does PPF represent opportunity cost
increases of an extra marginal unit production of one good leads to increasing sacrifices of production of the other good
28
why does the gradient of the PPF increase
there must be greater sacrifice in terms of the good foregone to produce one more new good
29
factors causing an outward PPF shift
- higher productivity
- better management to reduce wastage
- increase in stock of capital or labour
- innovation or invention of new products or resources
- discovery of new natural resources
30
factors causing inward PPF shift
- natural disasters
- civil war / conflict
- outward migration of labour
- decline in productivity caused by a recession
31
what causes a shift in PPF
increase/decrease in quality or quantity of factors of production
32
capital goods
goods used to increase future capacity of the economy
33
consumer goods
goods created for current use
34
consumer goods
goods created for current use
35
effect of capital and consumer goods on living standards
if an economy chooses to produce more consumer goods, living standards in the present will increase but fall in the future
if an economy chooses to produce more capital goods, living standards in the present will decrease, but increase in the future
36
trade off
willingness of an economic agent to give up one thing for another
37
axioms for rationality
completeness, transitivity, non-satiation
38
completeness
if the individual has an opinion on the value of any item relative to the value of another item
has an order of preferences and understands their choices
39
transitivity
consistent preferences through ranked order
40
non-satiation
belief that 'more is better' - utility increases the more consumption increases
41
incentive
something that motivates an economic action
often relates to profit, prices and social welfare
42
market economy
market forces are allowed to guide the allocation of resources in a society through supply and demand with the price mechanism without government intervention
43
command economy
government makes all economic decisions and allocates resources
44
mixed economy
market forces work with government intervention
45
advantages of a free market economy
efficiency, entrepreneurship, choice, incentives, competition
46
disadvantages of a free market economy
1. income and wealth inequalities
2. lead to monopolies
3. under-provision of merit goods
4. fail to address negative externalities
47
advantages of a command economy (3)
1. maximises welfare,
2. low unemployment,
3. prevent monopolies
48
disadvantages of a command economy (4)
poor decision making, restricted choice, lack of risk taking and efficiency
49
productive efficiency
when producers minimize the wastage of resources
50
allocative efficiency
Allocative efficiency exists when the production of a good is at a level where price equals marginal cost
51
dynamic efficiency
involves improving allocative and productive efficiency over time
52
evaluating economic systems
incentives for economic agents show why command economies cannot produce resources efficiently - but in a free market this does not create allocative efficiency
mixed economies provide incentives but the government is still free to solve market failure
53
specialisation
when individuals, firms, regions and whole economies focus on making a particular good/service
54
division of labour
when the production process is broken down into smaller tasks performed by different individuals/capital
55
advantages of specialisation / division of labour (3)
1. increased output
2. less wastage
3. lower unit costs
56
disadvantages of specialisation / division of labour
boredom
57
advantages of specialisation in trade
1. greater output
2. greater variety and choice
3. economic growth
58
disadvantages of specialisation in trade
1. structural unemployment,
2. over-reliance on trading partners,
3. changes in tastes and fashions,
4. over-extraction of finite resources
59
opportunity cost formula
change in production of good B / change in production of good A
60
production
measure of the value of output of goods and services
61
productivity
efficiency of factors of production
62
barter system
system of exchanging one product for another without the use of money, requires a double coincidence of wants
63
money as a medium of exchange
both sides agree on the value of the currency, a price can be negotiated
64
specialisation addressing the basic economic problem
higher output, variety, bigger market - more wants and needs to be satisfied
competition and lower prices - specialization acts as a way to reduce costs as firms want to remain competitive
65
division of labour addressing the basic economic problem
raise output per person - competition and reduce costs
repetitive work lowers productivity - quality and quantity suffers - not with machinery
if one machine breaks leads to halt of entire production process
structural unemployment with narrow skills - cannot work to produce other goods
66
demand
willingness and ability to purchase a good or service at a given price over a given period of time
67
individual demand
what one individual would be willing and able to buy at a given price over a given period of time
68
what causes the inverse relationship between price and quantity demanded on the demand curve
disposable income effect
substitution effect - relative price changes to competitors
diminishing marginal utility
69
total revenue formula
price x quantity sold
70
joint demand
products are complements for another
71
competitive demand
products are substitutes for one another
72
composite demand
product has multiple uses
73
shift of demand curve
any factor other than price affects demand leads to increase/decrease
74
factors causing shift in demand
Population
income
related goods/ substitutes
advertising
tastes of fashion
expectation
season
75
supply
willingness and ability of a firm to sell products at a given price over a given period of time
76
individual supply
what one firm would be willing and able to supply at a given price over a given period of time
77
market supply
sum of all firms' willingness and ability to supply a product at a given price over a given period opf time
78
why does the supply curve have a positive relationship
the higher the price the greater the incentive for a business to supply products
79
joint supply
when one product is a byproduct of another, or the production process leads to more than one product
80
competitive supply
when a producer has alternative uses for the factors of production and must decide what to produce
81
movements along the supply curve
there is an expansion/contraction from a change in price
82
shift of the supply curve
when any other factor affects supply leading to an increase/decrease
83
market equilibrium
when quantity demanded equals quantity supplied - allocative efficiency
84
market disequilibrium
in a competitive market, market forces will naturally gravitate to equilibrium
if the price is too high there is excess supply
if the price is too low there is excess demand
85
ceteris paribus
assumes there are no other influences on the market, which operates with total efficiency
allows to model how a market should respond
86
evaluating the impact of demand and supply in related markets
extent of the substitute/complement
time frame
size of the price change
87
consumer surplus
difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they do pay
88
where is the consumer surplus
above price, below demand curve
89
if PED is elastic what is consumer surplus
consumer surplus is zero
90
evaluating impact of price change on consumer surplus
the more inelastic PED is, the more consumer surplus will change when price changes
91
if PED is inelastic what is consumer surplus
consumer surplus is infinite
92
producer surplus
difference between what producers are willing and able to supply a good for and the price they actually receive
93
where is producer surplus
below price and above supply
94
when is consumer and producer surplus important
when discussing the effects of different government intervention in markets
95
total economic welfare
producer surplus + consumer surplus
96
when does producer surplus increase
if supply costs fall and S shifts out
if market demand increases and D shifts out
97
evaluation of the impact of a change in price on producer surplus
the more inelastic PES is, the more producer surplus will change
98
if PES is perfectly elastic what is producer surplus
producer surplus is 0
99
if PEs is perfectly inelastic, what is producer surplus
producer surplus is infinite
100
price discrimination
consumer surplus changes with different groups
if firms can identify groups of consumers who are willing and able to pay different prices for the same product, this is a way of turning consumer surplus into producer surplus for higher revenue
101
price elasticity of demand
responsiveness of quantity demanded due to a change in price
102
PED formula
% change in quantity demanded / % change in price
103
% change formula
new-old/old x 100
104
price inelastic demand
a change in price leads to a less than proportionate change in quantity supplied
105
price inelastic demand value
between 0 and -1
105
price inelastic demand value
between 0 and -1
105
price elastic demand
a change in price leads to a more than proportionate change in quantity supplied
105
price inelastic demand value
between 0 and -1
105
price inelastic demand value
between 0 and -1
106
price elastic demand value
between -1 and -infinity
107
total revenue when PED is inelastic and price increases
total revenue increases
108
factors affecting PED
substitutes
proportion of income
luxury / necessity
addictive
time period
109
when PED is -1 what is demand
demand is unitary
110
when is total revenue maximised along a PED curve and what is the PED
PED is unit elastic exactly half way along the PED curve - at this point total revenue is maximised
111
on a straight line PED curve, what is the elasticity to the left of the midpoint and how does this affect total revenue
it is price elastic
if price is cut along this range, total revenue will increase
112
on a straight line PED curve, what is the elasticity to the right of the midpoint and how does this affect total revenue
it is price inelastic
if price is cut along this range, total revenue will fall
113
income elasticity of demand
responsiveness of quantity demanded due to a change in income
114
income elasticity formula
% change in quantity demanded / % change in income
115
What to produce (free market economy):
determined by what the consumer prefers
116
How to produce (free market economy)
Producers seek to make profit
117
For whom to produce ( Free market Economy)
whoever has the greatest purchasing power in the economy
118
what to produce (Planned economy)
Determined by what the government prefers
119
How to produce it ( Planned economy)
governments and their employees
120
For whom to produce it (Planned economy)
who the government prefers
121
what to produce ( mixed economy)
determined by the government and the consumer preferences
OCR economics
flashcards
Decks in class (28)
# Cards
-
Microeconomics125
-
Microeconomics PT2101
-
Microeconomics PT353
-
Macroeconomics81
-
Macroeconomics key terms68
-
New macroeconomics key terms197
-
Financial Markets/crash66
-
Exam questions60
-
Economics - 1.3.1 - Business Objectives18
-
Economics- 1.3.2a- Costs9
-
Economics- 1.3.2b - Returns to a factor6
-
Economics - 1.1.2 - The allocation of resources27
-
Economics - 1.2.6b - Income Elasticity of Demand12
-
Economics - 1.2.6a - Price Elasticity of Demand14
-
Economics - 1.2.6c - Cross Elasticity of Demand (XED)12
-
Economics - 2.1.1 - Circular Flow Of Income15
-
Microeconomics - Government Intervention64
-
Quick Exam58
-
labour markets32
-
Context131
-
Econplusdal Theme 1120
-
ECONPLUSDAL THEME 3139
-
ECONPLUSDAL THEME 2113
-
THEME 4143
-
Equations62
-
week 923
-
macro(UNI)55
-
quick 40's2
