1.1

Cards (28)

  • What are non-renewable resources?
    Are finite in supply and the rate of extraction of finite resources depends on the current market price.
  • What are examples of non renewable resources?
    • Crude oil
    • Coal
    • Natural gas-methane
    • Fossil fuels
  • What is specialisation?

    Occurs when an individual/firm concentrates on producing certain goods and services, and trading any surplus with others.
  • What is division of labour?

    A from of specialisation where the tasks needed to produce an item are divided among workers at an individual level.
  • What is a production possibility curve (PPC)?

    A graph that shows the maximum possible combinations of two goods that can be produced and achieved in an economy with given resources and technology (efficiently employed).
  • What can a PPC show?
    A PPC can also show the maximum potential output combination of two goods that a firm can achieve when it uses all its resources efficiently.
  • When will a PPC shift outwards?
    A PPC will shift due to:
    • A gain in more factors of production- quality improves
    • When there is economic growth
  • What is the law of diminishing return?

    The idea that marginal (extra) output of consumer goods diminishes as more factor resources are allocated to it.
  • What is resource depletion? 

    The decline in the total stock of resources available.
  • What are examples of resource depletion?
    • Climate change
    • Low rates of investment
  • What are the causes of an outward shift in a PPC?
    • Higher productivity/efficiency of factor inputs
    • Increase in stock of capital and labour supply
    • Innovation and invention of new products and resources
    • Resources/extraction of new raw materials
    • Advances in technology
  • What causes an inward shift in a PPC?
    • War
    • Natural disasters
    • Trend towards early retirement
    • Net migration of people out of a country rises
  • What is the cause of an inward shift in a PPC?
    • Caused by a fall in the productive potential of a country
    • Decrease in the factors of production
  • What is a mixed economy?

    Where both the free market mechanism and the Government planning process allocate significant proportions of total resources.
  • what is a planned/command economy?
    An economic system where resources are state owned (Government) and are allocated centrally to maximise social welfare.
  • What are agents in a mixed economy?
    • Government
    • Producers
    • Consumers
    • Owners of the factors of production.
  • Agents in a mixed typically supply public and merit goods.
    State will intervene in markets to correct market failures.
    The mix will change over time as some industries are privatised or nationalised.
  • In a planned/command economy:
    • Price controls may exist
    • Workers work for a wage difference-given jobs by the Government
    • Output decisions taken by a planning committee
    • Goods are allocated through rationing
    • Market prices don't inform resource allocation.
  • What are 6 benefits of a planned/command economy?
    • Low income inequality
    • Security provided by the state
    • Full employment
    • Adequate provision of public and merit goods
    • Possible environment protection
    • National interest rather than individual profits
  • What are 5 negatives of a planned/command economy?
    • Low product quality-no profit motive
    • Low choice/variety for consumer- no competition
    • Needs a large bureaucracy
    • Little innovation or invention-no profit motive
    • Corruption may develop-shadow economy.
  • What is a market economy?

    Where resources are allocated by the market mechanism of demand and supply.
  • What are 3 benefits of a market economy?
    • Invisible hand allocates resources-allocative efficiency
    • Innovation and productive efficiency
    • Choice and variety due to competition.
  • What 4 negatives of a market economy?
    • High levels of income inequality
    • Production of demerit goods
    • Pollution and environmental damage
    • No public goods and unfair supply of merit goods.
  • What is a need?

    Things we need to survive; essential for life.
  • What is a want?

    Things we would like to have, irrespective of whether you have the resources to pay for it.
  • What are the factors of production?

    The resource inputs that are available in an economy for the production of goods and services.
  • What are 2 benefits of specialisation?
    • Can use its factors of production in the most efficient way-productive efficiency increases.
    • Products not normally available can be exchanged fro products produced in another.
  • What are 5 drawbacks of specialisation?
    • Economies based on producing finite resources will suffer-run out
    • Boring work-high levels of staff turnover
    • Demand may fluctuate-unemployment
    • Change in consumer tastes-harms exports if no longer needed
    • Result in machine replacing labour-unemployment.