OCR Economics Alevel (topic 1.1) (micro)

all economic problem flashcards

what is a free good?

-a non economic good
-it holds no value in the market, as they’re free and abundant
-an example is air, or water in a river.

what is an economic good?

-these goods hold value in the market, and they have a price
-all products that’re sold are economic goods
-they’re scarce and therefore command value in the market

what is the economic problem?

the economic problem is the idea that humans have unlimited needs and wants, and there’s not enough resources to fulfil these needs and wants. This results in choices have to be made about how to produce goods out of the finite resources, and who to make these goods for.

what are the 4 factors of production?

land, labour, capital and enterprise
(all economic resources can be sorted into any of these 4 factors)

what is land?

all naturally occurring resources. This includes anything growing on the land, like food crops. This factor generates many of the raw materials used in the production process.

what is the factor payment for land?

Rent

what is labour?

a measure of the work carried out by human beings. It is, simply, the human labour used to contribute to the production process.

what is the factor payment for labour?

wages

what is supply of labour determined by?

The population amount, and the labour force.

what is capital?

-the physical and non human inputs used in production
-this could be factory buildings or machinery used in the production process.

what is the factor payment for capital?

interest

what is enterprise?

the entrepreneur who made the business. They combine all the other factor of production (Which are?) using the entrepreneurial skill of management to get a product through the production process and out to the public

what is the factor payment for enterprise?

profit

what are economic agents?

those who make the choices that the economic problem requires of them

what are the 3 types of economic agent?

households, firms and the government

what descions do households need to make?

-they make choices about their expenditure, what they spend their money on
-they also make choices about their labour supply (who they work for in order to receive an income)

why do firms exist?

to produce output of goods and services.

what choices do firms make?

they choose which goods and services to produce and output and how to produce them. They also choose the price to sell their good/service at.

what role does the government play in the economy?

they regulate the economy/markets by taxing firms

what objective do households have?

households usually make decisions that maximise their satisfaction

what objective do firms have?

the one major objective is to make profits (it could also be to get ahead of their competitors??)

what objective does the government have?

major ones are to have a stable economy and avoid high levels of unemployment

what is the difference between a positive economic statement and a normative economic statement?

positive are objective, and fact based while normative are subjective and opinion/value based

what is a positive economic statement with an example?

ones that can be tested and proved or disproved. e.g. The sky is blue this morning or smokers are more likely to get lung cancer

what is a normative economic statement with an example?

one that is value based and cannot be proved or disproved. e.g, All vapes smell terrible or summer is the best season

what is opportunity cost?

the cost of the next best alternative forgone