(Y11 Economics) Markets, Supply & Demand

what oppurtunity cost measures

impact of making one economic choice compared to another

formula for net benefits

toatal benefit - toatal ost

why is ppf reffered to as a model

because it shows the possible opportunity cost of two goods

3 assumption ppf is based on

level of technology is fixed

resources are fixed

economy produces just 2 goods

why ppf always have a negative slope

it has a negative slope because goods are being sacrificed with every opportunity cost

2 factor with example that move ppf outward

increase in technology- increase in technology of machines means more cards are able be produced

increase in quantity of produciton- more worker are hired so more iphones are prodyced

consumption goods compared to capital goods

capital goods are used to make more goods and services in future e.g tractor

consumer goods are final goods that are the final version of production and can’t be used to produce goods in the future e.g a shirt

economic problem

unlimited wants scarce resources to meet them

what does scarcity mean with example

there is not enough of 1 resource to meet high demand

for example not enough oil to meet with all demand because theres only a limited amount of it

free good compared to a economics good with example

free good-isn’t scarce and is free e.g air

economic good-a good that has high demand but not enough resource to meet demand e.g Rolex watch

why is economic problem a problem of choice

it is a problem of choice because consumer have unlimited want but limited resource to meet those wants

why all society face problem of scarcity

because theres not enough resources to meet wants of everyone in society

purpose of economic model

show a simplified way of explaining abstract idea it is a simple way to show economy

why economist use ceterus paribus in economic model

they use it because it allows them to see cause and effect of 1 factor in a economic model

marginal analysis

marginal analysis is looking at marginal benefits and comparing them to marginal costs

normative statement vs positive statement

normative statement is a statement that is subjective and can’t be proven or disproven by data

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positive statement-is a statement that can be proven or disproven through data

difference between micro and macro economics

micro-individual scale and how humans will react to change e.g individual reaction to increase in oil prices

macro-looking at economics on a national scale e.g ue rate

capital

a man made good that can be used to produce other goods in the future

factor that could affect supply of capital

investible funds

production cost/time

enterprise

ability of a human to combing CLL to produce a good or service

factor that affect supply of enterprise

funds

skills

Land

any resource or area that helps produce good or service

factor that affect supply of land

weather

location

labour

human skill that can be used to produce goods or services

factor that affect supply of labour

supply of labour

skill of labour

factor of production

CAPITOL

ENTERPRISE

LAND

LABOUR

why is money not considered capital

because money itself can’t produce a good or service it is a form of payment

according to circular flow wich group own factor of production

consumer/household

income earnt from 4 type of productive resources

C-intrest

E-profit

L-rent

L-wages

what are the 3 economic questions of produciton

what to produce

how to produce

for whom to produce it for

4 type of economic system

command

market

mixed market

traditional

advantage of traditional system

\-little to no uncertainty

\-less stress

\-more free time

advantage of mixed market

consumer freedom

ensures income is distributed evenly

advantage of command economy

can change direction of the economy

advantage of market economy

incentivises innovation

consumer satisfaction

disadvantage of traditional economy

no improvement of standard of living

disincentivises inovaiton and follow on past tradition

disadvantage of market economy

wealth is distributed unevenly

lack of innitiotives which are non profit

disadvantage of command economy

citizen loose motivation and innovaiton

stryggle to meet day to day changes

disadvantage of mixed economy

lack of incentive due to government oversight e.g tax so dont want to earn more

what features distinguish a market economy from a planned economy

in a market economy firms and household determine the economy

in a planned economy the centrol/government determines the economy

what is a inferior good

a inferior good is a good that is less consumed as people’s income increases

definition of economics

economics is the study of how people allocate their scarce resources to satisfy their unlimited wants

what is economics the study of

economics is the study of scarcity and the scarcity of choice

what is a consumption good

a good that is bought by consumer’s to satisfy their current wants

pricing mechanism

signals the intentions of consumers and producers

lets consumers know what needs to change in quantity bought or sold in markets

why does government intervene in the functioning of the price mechanism

government intervenes to limit the limitations of the market system

government intervenes when monopolies choose price of goods and when it’s not dependant on consumer and producer

factors that impact the slope of demand curve

substitution effect

income effect

diminishing marginal utility

how do you calculate the level of spending

demand x price