Comprehensive Year 10 Economics: Key Concepts and Frameworks

What is the Universal Economic Problem?

The economic problem is that individuals and societies have unlimited wants, but there aren't enough resources to satisfy them all.

What is opportunity cost?

Opportunity cost is the benefit given up when one option is chosen over another.

Define scarcity in economics.

Scarcity refers to the gap between limited resources and limitless wants or needs.

What does the Production Possibility Frontier (PPF) represent?

The PPF illustrates the maximum output combinations of two goods that can be produced with available resources.

What do points on the PPF indicate?

Points on the PPF are efficient, meaning all resources are being used effectively.

What do points inside the PPF represent?

Points inside the PPF are inefficient, indicating that resources are not being fully utilized.

What do points outside the PPF indicate?

Points outside the PPF are unattainable with current resources.

What happens to the PPF if the economy can produce more resources?

The PPF will shift to the right, indicating economic growth.

What is the primary economic role of the household sector?

The primary economic role of the household sector is consumption.

How do households earn money?

Households earn money through wages, rent, interest, and profit.

What is the primary economic role of the business sector?

The primary economic role of the business sector is the production of goods and services.

What are leakages in the Circular Flow of Income?

Leakages are money leaving the circular flow, which reduces spending in the economy.

What are injections in the Circular Flow of Income?

Injections are money entering the circular flow, which increases spending in the economy.

Give examples of leakages.

Examples of leakages include savings, taxes, and imports.

Give examples of injections.

Examples of injections include investment, government spending, and exports.

What is the relationship between injections and leakages for economic equilibrium?

If leakages equal injections, the economy is in equilibrium.

What does an increase in savings do to the Circular Flow of Income?

An increase in savings reduces spending in the economy.

What is the opportunity cost of moving from one point on the PPF to another?

The opportunity cost is how much of one good is given up to produce more of another good.

What does a rightward shift of the PPF indicate?

A rightward shift of the PPF indicates economic growth due to more resources or better technology.

What does a leftward shift of the PPF indicate?

A leftward shift indicates a reduction in resources or capacity.

What is the significance of the Circular Flow of Income model?

It describes how money flows between households and firms, illustrating economic activity.

What is the formula that represents total income, output, and expenditure?

Y = O = E, where Y is income, O is output, and E is expenditure.

What is the opportunity cost of producing more of one good?

It is the amount of another good that must be sacrificed to increase production.

What does the term 'economic growth' refer to?

Economic growth refers to an increase in the production of goods and services in an economy.

How does consumer demand affect total income?

An increase in consumer demand leads to an increase in total income, which finances greater expenditure and production.

What is the effect of increasing exports on the Circular Flow of Income?

Increasing exports leads to an increase in injections into the Circular Flow of Income.

What condition indicates that the economy is in equilibrium?

Injections equal leakages (I + G + X = S + T + M)

What happens when injections exceed leakages?

The economy expands (grows).

What occurs when leakages exceed injections?

The economy contracts (shrinks).

How does the household sector interact with the business sector?

Households earn wages from businesses and spend money on products.

What is the role of the government sector in the economy?

Responsible for taxation and government expenditure.

What does the finance sector do?

Manages savings, lends money, and facilitates investments.

What is the function of banks in the economy?

They act as intermediaries between depositors and borrowers.

What is savings in economic terms?

Income that is not spent on consumption.

What is simple interest?

A method of calculating interest earned on savings.

What are the components of GDP?

Consumption, investment, government spending, and net exports.

How does aggregate demand relate to GDP?

Aggregate demand refers to the total level of spending in the economy, which contributes to GDP.

What might be a positive outcome for households when a new shopping center opens?

New job opportunities and increased wages.

What impact does a factory closure have on households?

Loss of jobs and reduced income.

What happens to businesses when a popular new phone is released?

Increased sales and potential expansion.

What is the relationship between government expenditure and the economy?

Government spending injects money into the economy, stimulating growth.

What is the significance of the 4 sector model in economics?

It illustrates the interactions between households, businesses, government, and finance.

What are some decisions households must make regarding their income?

Decisions about spending on necessities and desires.

What is the role of government in managing economic scarcity?

To allocate resources effectively through taxation and spending.

What is the impact of savings on the finance sector?

Savings are a leakage that reduces immediate spending but can be lent out for investment.

What is the effect of increased taxation on the economy?

It represents a leakage that can reduce overall spending in the economy.

How do injections affect the overall level of economic activity?

Injections increase the overall level of economic activity.

What is the circular flow of income model?

A visual representation of how money flows between different sectors of the economy.

What are the four sectors of the circular flow of income model?

Households, Businesses, Government, and Finance

What does GDP stand for?

Gross Domestic Product

What is aggregate demand (AD)?

The total level of spending in the economy, equivalent to GDP Expenditure.

What is the largest share of aggregate demand?

Household consumption

What is the relationship between household income and consumption?

Household consumption is largely dependent on their level of income.

What are investments in the context of GDP?

Spending by businesses and households that increases the economy's capacity to produce goods and services.

What types of spending are included in government spending?

Spending on hospitals, schools, defense, roads, and transport.

What is the formula for calculating aggregate demand?

Aggregate Demand = C + I + G + (X - M)

What are injections in the circular flow of income model?

Additions to the economy, such as investments, government spending, and exports.

What are leakages in the circular flow of income model?

Withdrawals from the economy, such as savings, taxes, and imports.

What is the marginal propensity to consume (MPC)?

The amount of extra consumption resulting from an extra dollar of income.

What are normal goods?

Goods for which demand increases as household income increases.

What are inferior goods?

Goods for which demand decreases as household income increases.

What is the law of supply?

As the price of a good or service increases, the quantity supplied increases, and vice versa.

What is the law of demand?

As the price of a good or service decreases, the quantity demanded increases, and vice versa.

What factors can influence supply?

Costs of production, number of firms, weather, productivity, and technology.

What factors can influence demand?

Income, advertising, substitutes, complements, and consumer preferences.

What is structural government spending?

Spending that occurs regardless of the state of the economy, such as education and health.

What is cyclical government spending?

Spending on programs to support the unemployed during economic downturns.

How does consumer confidence affect consumption?

Higher consumer confidence typically leads to increased household spending.

What is the effect of rising house prices on household consumption?

Rising house prices can lead to an increase in household spending.

What happens when injections exceed leakages in the economy?

Economic growth occurs.

What happens when leakages exceed injections in the economy?

Economic contraction occurs.

What is the impact of interest rates on investment?

Higher interest rates can decrease investment due to increased borrowing costs.

What role does government policy play in influencing investment?

Government policy can provide incentives or subsidies that encourage business investment.

How does technology impact investment?

Advancements in technology can lead to increased investment in new capital.

What is the impact of a recession on household income?

Household income typically decreases during a recession, leading to reduced consumption.

What is the effect of an increase in demand on the supply curve?

It shifts the demand curve to the right, increasing the equilibrium price.

What happens to the supply curve when production costs decrease?

The supply curve shifts to the right, indicating an increase in supply.

What does a movement along the supply curve indicate?

It indicates a change in quantity supplied due to a change in price.

What causes a contraction along the demand curve?

A decrease in price causes a contraction along the demand curve.

What is a rightward shift in the demand curve caused by?

An increase in consumer income or preferences for the good.

What is the definition of equilibrium market price?

A price where quantity demanded equals quantity supplied, with no tendency to change.

What is a surplus in economic terms?

A situation where quantity supplied exceeds quantity demanded.

What is a shortage in economic terms?

A situation where quantity demanded exceeds quantity supplied.

What is a price ceiling?

A maximum legal price set below equilibrium to protect consumers, often leading to shortages.

What is a price floor?

A minimum legal price set above equilibrium, resulting in a surplus.

How does a decrease in the price of a substitute good affect demand?

It causes a leftward shift in the demand curve for the original good.

What is the impact of a subsidy on supply?

It shifts the supply curve to the right, increasing supply.

What happens to the demand for a normal good when consumer income increases?

The demand curve shifts to the right, indicating increased demand.

What is the relationship between markets and pricing?

Markets are influenced by demand, which dictates supply needs and pricing.

What is the Fish Market Game used for?

To apply supply and demand concepts to real-world scenarios.

What is the effect of a natural disaster on supply?

It typically causes a leftward shift in the supply curve, reducing supply.

What does a movement along the demand curve represent?

A change in quantity demanded due to a change in price.

What is the significance of the equilibrium point in a market?

It represents the price and quantity where supply and demand are balanced.

What happens to the equilibrium price if demand increases while supply remains constant?

The equilibrium price rises.

What is the role of technology in shifting the supply curve?

Improved technology can shift the supply curve to the right, increasing supply.

How does consumer preference affect demand?

Changes in consumer preference can shift the demand curve to the right or left.

What is the impact of increased taxi licenses on the taxi market?

It increases supply, potentially lowering taxi fares.

What is the effect of a trend making a product more popular?

It shifts the demand curve to the right, increasing demand.

What does it mean if the supply of a good is inelastic?

Supply does not significantly change in response to price changes.

What is the impact of a government tax on production?

It typically shifts the supply curve to the left, decreasing supply.