Economics (Micro-test)

Factors of production

Land, Labour Capital Enterprise

Basic Economic Problem

there are only a limited number of resources available to satisfy our need and wants

Consumer goods

goods that generate satisfaction

Capital goods

Goods that help produce other goods

e.g. Factories, offices, computers

3 Decisions that are made by each society

What to produce

How to produce

For whom to produce

How different types of Economies allocate resources

Free market Economies

Mixed Economies

Command Economies

Free Market Economy

Are Privately owned e.g. Usa

Each question is decided by the business upon the demands of the consumer

(People who pay get the goods)

Mixed Economies

Resources are Partly allocated by public sector (government) partly by the Provate Sector

Command Economies

Everything given is decided by the state

Opportunity Costs

The benefits of the next best alternative foregone

Using the Information explain the meaning of the term opportunity cost

with competing demands for limited resources the government needs to make choices.

By spending (x amount) on its first choice … it foregoes the potential benefits of the next best alternative in this case …

Economic goods

made with scare resources

incur an opportunity cost

Free good

not scarce

Example of free goods

Sunlight

Sea Water

Sand in the Sahara

Needs

These are the essentials, the basics of life that we can’t live without

Wants

These are items, activities and services that increase ones quality of life

Production Possibility Frontier (PPF)

Shows the different combination of economic goods which an economy is able to produce if all resources in the economy are fully and efficiently utilised

Any point lies within the PPF

Represents the inefficient use of resources or resources that remain unemployed.

Any point that lies outside of the PPF

A level of output that is currently beyond the maximum production level of the economy

Factors leading to an outward parallel shift of a ppf

The introduction of new technologies e.g. division of labour

Additional factors of production being made available

What causes a Non-Parralel shift in a PPF

If changes in factors of production or in new technology benefits only one good

Explain how an economy could consume outside the PPF but not produce there (2)

They Currently don’t have enough resources or technology to produce there.

The value of imports > The value of exports

Pareto optimal

It is impossible to increase the production of one good without reducing the production of the other

Define Specialisation

Specialisation is when we concentrate on a particular product or task

Productivity

Productivity measures output per time period

e.g. output per worker per hour

Production

Is the amount of total output from given resources

Division of Labour

Where the production of a good is broken up into many separate tasks each performed by one person

Productivity Fromulae

Output / No. of employees

the greatest issue facing the British economy today

The Uk productivity gap

How does productivity affect competiveness

The more productive an economy is the more competitive it is

Factors behind the productivity gap

Skills (shortages in many industries)

Low level of research and development

Lack of new Capital investment in equipment

Low productivity

Ways to increase Productivity

Through Specialisation

Through education and training (close skill gap)

Through automation and computerisation (I.e. AI)

Improving the country’s infrastructure