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

These flashcards cover key concepts and definitions from the lecture notes on economics, focusing on the nature of economics, scarcity, production possibilities, and types of economies.

What do economists develop to explain how the economy works?

Economists develop models.

What does 'ceteris paribus' mean in economics?

All other things remaining equal.

What distinguishes positive statements from normative statements in economics?

Positive statements are objective and can be tested, while normative statements are subjective and based on opinion.

What is the economic problem of scarcity?

People have finite needs but infinite wants, with limited resources available.

Define opportunity cost in economics.

The cost of one option in terms of the next best alternative that is given up.

What is a renewable resource?

A resource that can be replenished or replaced on a level equal to consumption.

What does a production possibility frontier (PPF) illustrate?

The maximum possible combinations of capital and consumer goods that an economy can produce with its current resources and technology.

What does it mean for an economy to operate efficiently on the PPF?

Resources are being used for their best possible use at all points on the curve.

What are the advantages of specialization in production?

Increases labor productivity, efficiency, and potentially higher quality goods.

What is the main function of money in an economy?

Acts as a medium of exchange, a measure of value, a store of value, and a method for deferred payment.

Define a free market economy.

An economy where individuals own the factors of production and resources are allocated through the price mechanism.

What is a command economy?

An economy where all factors of production are owned by the state and resource allocation is managed by the government.

What is a mixed economy?

An economy combining elements of both free market and command economies, where resource allocation is shared between the market and the government.