Overall economics test unit one

• How does economics aim to maximize economic welfare?

  By increasing people's choices
• What is the basic economic problem?

  Scarcity
• Why is it impossible to make everyone happy in economics?

  Resources are limited and human wants are unlimited
• What are the factors of production?

  Land, labour, capital, enterprise
• What leads to the concept of scarcity?

  Unlimited human wants and limited resources
• What is a need?

  Something required to survive
• What is a want?

  Something that improves life quality
• What is the payment received for providing land?

  Rent
• What is the payment received for providing labour?

  Wages
• What is the payment received for providing capital?

  Interest
• What is the payment received for providing enterprise?

  Profit
• What is geographical mobility?

  The ability of resources to move location
• What is occupational mobility?

  The ability of workers to change work skills
• What is geographical immobility?

  Barriers to resources moving locations
• What can cause geographical immobility?

  Family ties and financial costs of moving
• What is occupational immobility?

  Inability to move easily between occupations
• What is opportunity cost?

  The sacrifice of the next best alternative forgone
• What choices do individuals face regarding spending?

  • Maximize utility with limited income
  • Decide how to spend based on needs and wants
  • Example: Buy a laptop or tablet
• What choices do firms face regarding production?

  • Maximize profit with limited resources
  • Decide what to produce
  • Example: Produce tablet computers or laptops
• What choices do governments face regarding welfare?

  • Improve welfare with limited tax revenue
  • Decide what goods and services to provide
  • Example: More schools or defense spending
• What is disposable income?

  Income after tax is paid off
• What is discretionary income?

  Income left after essential bills
• Why do individuals save money?

  • For emergencies
  • For treats
  • Financial protection
  • Future spending
  • Retirement
• What is a Cash ISA?

  A tax-free savings account
• What is an instant access savings account?

  Withdrawals anytime without penalty
• What is a regular savings account?

  Requires monthly deposits
• What are treasury bonds?

  Government bonds with periodic interest
• What are premium bonds?

  Government security with cash prize draws
• Why do individuals borrow money?

  • To buy assets
  • To consolidate debt
  • To cover repairs
  • To fund education
  • To cover expenses
• What is a mortgage?

  A loan to buy property
• What is a credit card?

  A card that allows you a certain amount of money to spend and then you have to pay it back
• What is hire purchase?

  Paying for an asset over time
• What is a bank loan?

  A fixed sum borrowed with interest
• What is an overdraft?

  Access to funds beyond account balance
• What are payday loans?

  Short-term loans with high interest
• What should borrowers consider before borrowing?

  • Repayment ability
  • Compare interest rates
  • Avoid non-essential borrowing
  • Job security
  • Check for late payment penalties
• What is the importance of budgeting?

  • Reduces uncertainties
  • Helps manage income and expenses
  • Aids in financial planning
• What are payday loans?

  Short term loans with high interest rates
• Who are payday loans targeted at?

  Individuals with poor credit ratings
• What can happen if a payday loan is not repaid on time?

  Huge interest is added to the amount owed