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30 Cards in this Set
- Front
- Back
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what is economic activity? |
anything to do with the buying and selling of resources (changing raw materials into a product) |
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what is scarcity? |
having a limited amount of something, to the point where it will run out in the future |
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what is an opportunity cost? |
the benefits lost from something that is given up in favour of something else |
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what questions do we always ask ourselves as economists? |
WHAT TO PRODUCE? HOW TO PRODUCE IT? FOR WHOM TO PRODUCE IT FOR? |
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what is the economic problem? |
we live in a world where resources are scarce, however people have unlimited wants |
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what is the difference between renewable and non-renewable? |
a renewable resource can replenish itself, whereas a non-renewable resource cannot be replaced |
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what are the 4 factors of production? |
land labour enterprise capital |
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what country is a command economy? and what is a free market economy? |
command economy = North Korea (government decides everything) free market economy = all decisions are made by the private sector (individuals) |
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what is a firms economic objective? |
to gain profit |
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what does a PPF curve stand for and what does it show? |
production possibility frontier it depicts the maximum output possibilities for tow or more goods given a set of inputs |
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what could cause a PPF curve to shift outwards? |
economic growth increase in labour increase in quantity of respources |
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what could cause a PPF curve to shift inwards? |
natural disaster decrease in labour decrease in resources available lack of technology |
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what is demand? |
the demand for a good or service backed up by the ability to pay for it |
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what does lower prices lead to? |
higher demand |
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what could cause shifts in the demand curve? |
price substitutes (alternatives) income tastes/lifestyles compliments (products that go well together) |
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what is an inferior good? |
a value good, demand increases during a recession when income is low |
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what is elasticity? |
the responsiveness of one variable to changes in another |
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what is the calculation for price elasticity of demand? |
% change in quantity demanded / % change in price |
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what does an elastic good mean? |
it is very responsive to a change in price ( reduced price = increased sales ) |
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what is an example of an inelastic good? |
petrol |
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what is supply? |
the quantity of a product / service that a producer is willing to and able to supply onto the market at a given price in a given time period |
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why are supply curves sloped from left to right? |
because as the price rises, firms will be more like to increase output |
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what are the causes of a shift in the supply curve? |
changes in factors of production competition natural factors government exchange rates
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what is excess demand? |
when the price is so low, that too many consumers want the good while producers are not making enough of it (shortage of products) |
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what could cause excess supply? |
increase in price upgrade of a substitute good increase in productivity seasonal |
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what does the term relatively inelastic mean? |
difficult and time consuming to change the output of the good in response to changes in price |
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what is elasticity of supply? |
% change in quantity supplied / % change in price |
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what do the answers to elasticity of supply show? |
> 1 = elastic < 1 = inelastic = 0 = perfectly inelastic = infinity = perfectly elastic |
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what is an example of joint supply? |
supply of houses is inelastic = higher prices = people moving away from big cities (making a lot of money on their homes) = increase in price of land |
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what is joint demand? |
increase in demand for something leads to increase in demand for its complimentary product |
