Year 11 ATAR Economics Revision Checklist

Comprehensive practice flashcards covering microeconomics and macroeconomics concepts, equations, and models from the Year 11 ATAR Economics Revision Checklist.

What is the fundamental economic problem that gives rise to scarcity?

The conflict between unlimited human wants and finite, scarce resources.

How is opportunity cost defined in economics?

The value of the next best alternative forgone when an economic decision or choice is made.

What are the four factors of production and their corresponding rewards?

Land (earns rent), labour (earns wages), capital (earns interest), and enterprise (earns profit).

What is the key difference between microeconomics and macroeconomics?

Microeconomics focuses on individual consumers, households, and firms in specific markets, whereas macroeconomics examines the economy as a whole, focusing on aggregate variables such as GDP, inflation, and unemployment.

What does the Latin term ceteris paribus mean in economic modeling?

"All other things being equal," meaning all other variables are held constant while analysing the effect of a change in one variable.

How do rational economic decision-makers use marginal analysis?

They compare marginal benefit ($MB$) with marginal cost ($MC$), undertaking an action only as long as $MB \ge MC$.

What does a Production Possibility Frontier (PPF) illustrate?

The maximum combinations of two goods or services that an economy can produce when all available resources are fully and efficiently employed.

What is the difference between a movement along a demand or supply curve and a shift of the curve?

A movement along a curve is caused solely by a change in the price of the good itself, whereas a shift of the entire curve is caused by a change in non-price determinants.

What are the main non-price determinants that cause a shift in the demand curve?

Consumer income, population size, consumer preferences/tastes, prices of substitute goods, prices of complementary goods, and expected future prices.

What are the main non-price determinants that cause a shift in the supply curve?

Costs of production, technology, the number of suppliers, expected future prices, and supply shocks (such as natural events).

What condition defines market equilibrium?

A state where quantity demanded equals quantity supplied ($Q_d = Q_s$) at the market-clearing price, resulting in neither a surplus nor a shortage.

What is the formula for calculating Price Elasticity of Demand (PED)?

$$\text{PED} = \frac{\%\text{ change in quantity demanded}}{\%\text{ change in price}}$$

What is the formula for calculating Price Elasticity of Supply (PES)?

$$\text{PES} = \frac{\%\text{ change in quantity supplied}}{\%\text{ change in price}}$$

What is the formula for Total Revenue (TR)?

$$\text{Total Revenue} = \text{Price} \times \text{Quantity sold}$$

How does an increase in price affect total revenue if demand is price inelastic?

Total revenue will increase, because the percentage drop in quantity demanded is proportionally smaller than the percentage increase in price.

How does price elasticity determine the incidence of an indirect tax?

The party (consumer or producer) with the more relatively inelastic curve bears the larger economic burden of the tax.

What are consumer surplus, producer surplus, and total surplus?

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay; producer surplus is the difference between the price received and the minimum price suppliers are willing to accept; total surplus is the sum of consumer and producer surplus.

What does deadweight loss (DWL) represent in market analysis?

The net loss of total economic surplus that occurs when an economy produces at an output level that is not allocatively efficient.

What is a price ceiling and what market condition does an effective ceiling produce?

A legally imposed maximum price set below the market equilibrium price, leading to a persistent shortage ($Q_d > Q_s$).

What is a price floor and what market condition does an effective floor produce?

A legally imposed minimum price set above the market equilibrium price, leading to a persistent surplus ($Q_s > Q_d$).

How does a market quota restrict quantity and affect welfare?

A quota sets a physical limit on the maximum quantity that can be produced or imported, shifting effective supply, raising the market price, and generating deadweight loss.

Why do negative production externalities lead to a market failure?

They impose spillover costs on third parties that are not reflected in market prices, causing marginal social cost to exceed marginal private cost ($MSC > MPC$) and resulting in overproduction.

How are goods classified into private, public, club, and common-resource goods?

Private goods are rivalrous and excludable; public goods are non-rivalrous and non-excludable; club goods are non-rivalrous and excludable; common resources are rivalrous and non-excludable.

What are the free-rider problem and the tragedy of the commons?

The free-rider problem occurs when individuals consume non-excludable public goods without paying; the tragedy of the commons occurs when non-excludable but rivalrous resources are overexploited and depleted.

What are the five sectors in the circular flow of income model?

Households, businesses (firms), the financial sector, the government sector, and the overseas (international) sector.

What are the leakages and injections in the five-sector circular flow model?

Leakages are Savings ($S$), Taxation ($T$), and Imports ($M$); injections are Investment ($I$), Government spending ($G$), and Exports ($X$).

What is the equilibrium condition in the circular flow model?

$$S + T + M = I + G + X$$

What is the formula for Gross Domestic Product (GDP) using the expenditure method?

$$\text{GDP} = C + I + G + (X - M)$$

What is the formula for calculating real GDP growth?

$$\text{Real GDP growth} = \frac{\text{New real GDP} - \text{Old real GDP}}{\text{Old real GDP}} \times 100$$

What is the distinction between nominal GDP and real GDP?

Nominal GDP measures output using current market prices, whereas real GDP adjusts output for price changes by holding prices constant to remove the effect of inflation.

What are the four main phases of the business cycle?

Expansion, peak (or boom), contraction (or downswing), and trough (or recession).

What is the formula for calculating the inflation rate from CPI values?

$$\text{Inflation rate} = \frac{\text{New CPI} - \text{Old CPI}}{\text{Old CPI}} \times 100$$

How do headline inflation and underlying inflation differ?

Headline inflation reflects price movements across the full Consumer Price Index (CPI) basket, while underlying inflation removes volatile and one-off price changes to identify the persistent core trend.

What is the difference between demand-pull and cost-push inflation?

Demand-pull inflation is caused by excessive aggregate demand pulling prices up, while cost-push inflation is caused by increases in production costs pushing aggregate supply down and prices up.

What is the formula for calculating the unemployment rate?

$$\text{Unemployment rate} = \frac{\text{Unemployed}}{\text{Labour force}} \times 100$$

What is the formula for calculating the labour force participation rate?

$$\text{Participation rate} = \frac{\text{Labour force}}{\text{Working-age population}} \times 100$$

What are the three main types of unemployment?

Frictional unemployment (workers in transition between jobs), structural unemployment (mismatch between worker skills and employer needs), and cyclical unemployment (deficiency in aggregate demand).

What relationship does the short-run Phillips Curve depict?

An inverse (trade-off) relationship between the rate of inflation and the rate of unemployment.

What is the distinction between income and wealth?

Income is a flow of money earned over a specific period (such as wages, interest, or rent), whereas wealth is a stock of accumulated assets owned at a given point in time (such as property or shares).

What do the Lorenz Curve and the Gini coefficient show regarding income distribution?

The Lorenz Curve plots the cumulative percentage of income received against the cumulative percentage of households; the Gini coefficient quantifies this degree of income inequality, ranging from $0$ (complete equality) to $1$ (complete inequality).

What are the Australian government's four primary macroeconomic objectives?

Sustainable economic growth, price stability, full employment, and a more equitable distribution of income.

What is the distinction between progressive, proportional, and regressive taxation?

A progressive tax takes a higher percentage of income as income rises; a proportional tax takes the same percentage of income across all income levels; a regressive tax takes a lower percentage of income as income rises.

What are the formulas for average tax rate (ATR) and marginal tax rate (MTR)?

$\text{Average tax rate} = \frac{\text{Tax paid}}{\text{Income}} \times 100$ and $\text{Marginal tax rate} = \frac{\text{Change in tax paid}}{\text{Change in taxable income}} \times 100$

How do direct and indirect taxes differ, with examples from the Commonwealth budget?

Direct taxes are levied directly on income or wealth and cannot be shifted (e.g., personal income tax, company tax); indirect taxes are levied on goods and services and can be shifted along the supply chain (e.g., GST, excise duty).