Edexcel Economics A-Level Theme 1: Introduction to Markets and Market Failure

These flashcards cover key concepts from the lecture notes on economics, focusing on market structures, economic principles, and the role of government in economic systems.

What does the assumption of ceteris paribus mean in economics?

It means that other things are being held equal or constant, so nothing else changes.

What is the difference between positive and normative statements?

Positive statements are objective and can be tested with factual evidence, while normative statements are based on value judgments and opinions.

What is the basic economic problem?

Scarcity, where wants are unlimited but resources are finite, necessitating choices to be made.

What is opportunity cost?

The value of the next best alternative forgone when making a choice.

What are the factors of production commonly referred to as CELL?

Capital, Entrepreneur, Land, and Labour. They represent inputs used to produce outputs.

What is the difference between renewable and non-renewable resources?

Renewable resources can be replenished over time, while non-renewable resources cannot be replaced once consumed.

What do production possibility frontiers (PPFs) depict?

They illustrate the maximum productive potential of an economy using a combination of two goods or services.

What is the law of diminishing returns?

It states that the opportunity cost of producing more of one good increases as more of that good is produced.

What is specialization in the context of economics?

It occurs when each worker completes a specific task in the production process, enhancing efficiency and output.

What are the functions of money in an economy?

A medium of exchange, a measure of value, a store of value, and a method of deferred payment.

What characterizes a free market economy?

Markets operate with minimal government intervention, driven by supply and demand, where private individuals own resources.

What is the primary disadvantage of a command economy?

Governments may fail to accurately meet consumer preferences and can limit personal freedom.

What defines a mixed economy?

It combines features of both free market and command economies, with government involvement in the provision of public and merit goods.