T1

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Explain what is meant by ceteris paribus
This assumption is that other things are being held equal or constant, nothing else chnages
1 of 40
Explain what is meant by a positivie statement
Positive statement are factual statements and can thus be tested as true or false.
2 of 40
Explain what is meant by a normative statemnent
re statements based on value judgement and therefore cannot be tested exactly as true of false. May have words such as ‘should’ and would have subjective phrases.
3 of 40
Explain the problem of scarcity
Where there are unlimted wants and finite resources. A resource is a factor of production used to produce goods and services
4 of 40
Explain what is meant by a renewable resouce
any natural resource that can replenish itself naturally over time, as wood or solar energy
5 of 40
Explain what is meant by a non renewable resource
any natural resource from the Earth that exists in limited supply and cannot be replaced if it is used up;
6 of 40
Explain the importance of opportunity costs
the loss of other alternatives when one alternative is chosen.
7 of 40
Explain what is meant by a production possibility frontier
PPF is a curve showing the maximum potential output of two commodities an economy can achieve assuming all available resources are used fully
8 of 40
Explain how a PPF can depict the maximum production potential
In the PPF, all points on the curve are points of maximum productive efficiency. This is when no more output of any good can be achieved from the given inputs without sacrificing output of some good.
9 of 40
Explain how the PPF can depict opportunity costs
The Law of Diminishing Returns state that the opportunity cost of producing more of one commodities (e.g. consumer goods) increases, in terms of the lost units of the other commodity (capital goods) that could have been produced
10 of 40
Explain how the PPF can depict economic growth or decline
Shown by outward shift in PPF curve, meaning that it is possible to produce more capital and more consumer goods. To increases productive potential we can either improve quality or quantity of the factors of production and improve tech
11 of 40
Explain how the PPF can depict an efficient allocation of resources
Efficient: All points on the PPF line is said to be productively efficient for example X and Y, meaning production takes place in the lowest cost and it would be impossible to produce more of one good without decreasing production of the other good
12 of 40
Explain how the PPF can depict an inefficient allocation of resources
Inefficient: Producing at Point W or V is inefficient, as resources are not used to their full productive potential. There is the potential to use these resources more efficiently, which would shift production closer to the curve
13 of 40
Explain how the PPF can depict possible production
Any point that lies either on the maximum productive potential on the PPF curve or to the left of the curve is said to be an attainable point, as production can take place with currently all available resources . to increase maximum --> growth
14 of 40
Explain how a PPF can depict unobtainable production
unobtainable is beyond the PPF. In order for the position to be met, the PPF would have to shift, meaning economic growth is required. This can be achieved by improving tech or the quality or quantity of production but this should take time
15 of 40
Explain a movements along the PPF curve
Moving along the PPF uses the currently available quantity and quality of resources, and shifts production from one commodity to the other, thus less of one commodity is produced and more of the other is. This causes opportunity costs
16 of 40
What causes a movement in a PPF curve
a movement along the curve happens when the economy goes from one combination of goods to another. This creates opportunity costs
17 of 40
What causes a shift in the PPF curve
Change in quantity or quality of FoP OR Change in technology
18 of 40
Explain a shift ain a PPF curve
This increases the maximum productive potential and reduces opportunity costs since more goods can be produced overall
19 of 40
Explain why a PPF is concave
A PPF is concave in the origin this is because as more resources are allocated towards one goods the extra output gets smaller. This occurs because not all factors inputs are equally suited to producing items leading to lower productivity
20 of 40
Explain what is meant by a capital good
goods that are used in producing other goods, rather than being bought by consumers
21 of 40
Explain what is meant by a consumer good
goods that are ultimately consumed rather than used in the production of another good
22 of 40
Explain what is meant by specialization and the division of labour
is when the production process of a good is broken down into different tasks and labour is allocated to each tasks, so participants may specialise. First noted by Adam Smith
23 of 40
Explain Adam's Smith Rationale for specialisation and the division of labour
1776 observed that in a Scottish pin factory, dividing up the production process into 18 different tasks and assigning labour to each process, increased output from 20 pins per individual worker to 4,800 pins per worker.
24 of 40
Give advantages of specialization and the division of labor in organizing production
1. Matches Skills with equipment (effective capital use) -> Increase productivity -> reduces costs per unit -> higher revenue. 2. Repetition -> more skilled 3. Higher productivity -> higher quantity-> PPF shift
25 of 40
Give disadvantages of specialization and the division of labor in organizing production
1. Limits career opporunties//structrual unemployment. 2. Danger of ill or resignation from indivual could expose business. 3. work -> repetitive-> low staff moral -> reduce productivity
26 of 40
Give advantages of specializing in the production of goods and services to traDE
1. Countries can exploit their comparative advantage. 2. Use resources elsewhere-> increase quantity-> Opporuntity costs lower->PPF shifts. 3.
27 of 40
Give disadvantages of specializing in the production of goods and services to traDE
1. LEDCs may exhaust resources, not sustainable for future//-ve externalities. 2. Countries could become over depenent on one commodity, so if price fall or shock, economy would suffer. 3. Relying on ocountries for vital resources, shock affects us
28 of 40
List the functions of money
1. As medium exchange 2. Measure of value 3.Store of value 4. Method of deferred payment
29 of 40
Explain how money can be used as a medium of exchange
Without money, transcations = trading. People may not get what they needed. Items traded may not be of same value. Items traded only if a double coincidence of wants. Money elimantes this
30 of 40
Explain how money can be used as a measure of value
Money provides a mean to measure the relative value of different goods and services. Money also puts value on labour
31 of 40
Explain how money can be used as a store of value
Money holds its value to be used for payment. It can be kept for a long time without expiring. However the quantity of goods and service can be bought with money fluctuates with forces of supply and demand.
32 of 40
Explain how money can be used as a method of deferred payment
Money can allow for debts to be created. People can therefore pay for thing without having money in the present, and can pay for it later. This relies on money storing its value
33 of 40
Explain what is meant by a free market economy
When the price mechanism alone, allocates scare resources with no government invervention. Hayek-> intervention makes market oworsee e.g. 1930s crash. Smith-> invisible hand
34 of 40
Explain what is meant by a mixed economy
Scarce resoureces are allocated using the free market and government intervention
35 of 40
Explain what is meant by a command economy
Government, rather than free market allocte scare resourcves in an economy. Karl Marx said free market is unstable -> exploits labour-> not pay workers
36 of 40
Give advantgaes of a free market
Firms would be efficient as they have to provide g+s determined by consumers. Likely to lower costs and increase productivity -> more output. 2. Uninteded consequences. 3. More business and personal freedom
37 of 40
Give disadvantages of a free market
Ignores inequality tends to benefit those with high PP. 2. Monopolies can exploit 3 Overconsumption de-merit goods with -ve externalities. 4.Public Goods are underprovided
38 of 40
Give advantages of a command econmy
Government can cmpoensate for MF by reallocatinf resources. 2. Inquality in society is reduced, (welfare> profit). 3.Less mnopoly exploitation., 4. Easier to cordinate in times of crises
39 of 40
Give disadvantages of a command economy
Government failure. 2. May not meet consumer's preferences. 3. Limit competitiveness. 4. Limits democracy and freedom
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Card 2

Front

Explain what is meant by a positivie statement

Back

Positive statement are factual statements and can thus be tested as true or false.

Card 3

Front

Explain what is meant by a normative statemnent

Back

Preview of the front of card 3

Card 4

Front

Explain the problem of scarcity

Back

Preview of the front of card 4

Card 5

Front

Explain what is meant by a renewable resouce

Back

Preview of the front of card 5
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