Nature of Economics

1.1.1
Economics as a social science
1. What do economists make when predicting the future or testing evidence?
2. what is a key assumption that is made when events occur?

1. They need to make assumptions they do this by making models
2. ceteris paribus(other things are being held equal or constant so nothing changes)

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1.1.2
Positive and Normative statements
1. What is a positive Statement(with examples)?
2. What is a Normative Statement(with examples)?

1. A statement which is facts and testable It contains no approval or disapproval. E.g Boris Johnson is the UK's Prime minister.
2. A statement which expresses a value of judgement and whether a situation is desirable or undesirable. E.g Boris Johnson is

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1.1.3
The Economic Problem
1. what are the two Basic economic problems?
2. who is opportunity cost important?

1. SCARCITY- wants are unlimited and resources are finite.
OPPORTUNITY COST- the cost of the value of the next best alternative(cost of what you give up).
2. Economic agents E.g producers may have to choose between hiring extra staff or buying a new machi

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1.1.3
The Economic Problem
1. what are the 4 factors of production?(CEELL)

1. CAPITAL-Machines
ENTREPRENEURSHIP- Managerial ability
LAND-Natural resources
LABOUR-Human capital (workforce)

CELL

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1.1.3
The Economic Problem
1. How does Renewable resources effect the economic problem?
2. How can we improve the sustainability of renewable energy?
3. How can we reduce the decline of unrenewable resources?

1. Renewable resources are sustainable however they are being consumed faster than we can replace them.
2. Limit deforestation and introduce fishing quotas.
3. recycling and wind farms

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1.1.4
Production Possibility Frontier(PPF)
1. what is PPF?
2. what would happen if we allocated more resources towards good Y?
3. What are capital goods?
4. what are consumer goods

1. PPF shows the output combinations of two goods or services attainable when all resources are fully and efficiently used.
2. The output of good X would decrease because ore resources are being used to produce Good Y
3. Goods which are provided to make

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1.1.4
Production Possibility Frontier(PPF)
1. What is the diminishing of marginal returns?
2. what is it called when letters lie on the existing PPF line?
3. What is it called when letters lie below the PPF line?
4. What is it called when letters lie abo

1. There is a point where an increased level of inputs does not equal to an equal increase level of outputs.
2. Economically efficient
3. Economically inefficient- resources not truly utilized
4. Not yet attainable- don't have resources to reach that poi

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1.1.4
Production Possibility Frontier(PPF)
1. How can you reach economic growth(outward shift)?
2. What may cause the PPF to shift inwards?

1. Increase employees wage to improve productivity, Buy more machinery, flexible working, increase labour force and reducing waste.
2. A decrease in the quality and quantity of resources.

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1.1.4
Production Possibility Frontier(PPF)
1. How does opportunity cost link into PPF?

1. If the output of good y on the PPF increases then the opportunity cost is the output lost from the good x.

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1.1.5
Specialisation and the division of Labour
1. What is the meaning of division of Labour?
2. What did Adam smith say?

1. Its when workers specialize in very specific tasks. This means the work is divided up into many smaller parts. Each worker is responsible for there small part.
2. He said economic growth could be achieved by division of labour. He said this involve

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1.1.5
Specialisation and the division of Labour
1. what are the Advantages of division of Labour?
2. What are the Disadvantages of division of labour?

1. Productivity is increased, Less time wasted no time moving around tasks, Each worker specializes in task they are suited to.
2. Lack of variety, Loss of skill for workers, Boredom may cause problems and strike from employees could bring production to a

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1.1.5
Specialisation and the division of Labour
1. what are the advantages of Specialisation to trade?
2. what are the disadvantages of Specialisation to trade?

1. A country can gather specialized goods that it doesn't produce. They benefit from greater output, choice and lower prices
2. Country's may become over dependent on imported goods and exceed the value of its exports

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1.1.5
The Functions of money
1. what is a medium of exchange?
2. What is a store of value?
3. What is a measure of value?
4. A means of deferred payments?

1. It enables people to specialize exchanging the money earned from a specialist job to buy goods and services.
2. Enabling people to save in order to buy goods in the future.
3. Enabling people to assess the value of different goods and services.
4. Enab

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1.1.6
Free market economies, mixed economy and command economy
1. What are the main characteristics of a free market?
2. What did Adam smith and Frederic Hayek beleive?

1. -Private ownership of resources
-producers aim to maximise profits
-consumers aim to maximise satisfaction
-Markets left to its own devices
2. That the roll of government should be limited to providing public goods.

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1.1.6
Free market economies, mixed economy and command economy
1. what are the characteristics of a command economy?
2. what did Karl Marx believe?

1. -Government ownership of resources
-producers aim to produce production targets set by the government
- There is greater equality of income and resources
-Resources allocated by state
2. Thought that free market was unstable because workers are exploi

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1.1.6
Free market economies, mixed economy and command economy
1. What are the characteristics of a mixed economy?

1. -Mixture of both free market and command economy
-Government often provide public goods

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1.1.6
Free market economies, mixed economy and command economy
1. What are positives of a Free Market economy?
2. What are the negatives of a Free Market economy?

1. -Firms provide efficient goods and services demanded by consumers (lower costs) increases output
-More freedom for consumers
2. -Ignores inequality
- Public goods are not provided #
- Monopolies businesses run markets and our powerful.

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1.1.6
Free market economies, mixed economy and command economy
1. What are the Positives of a command economy?
2. What are the Negatives of a command economy?

1. -Easier to coordinate resources in times of crisis
- Government can compensate for market failure
- Inequality of society can be reduced
2. -It limits democracy and personal freedom
- Governments may fail on what they are producing.

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Nature of Economics

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