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Economics Unit 1

QuestionAnswer
Why do people spend? To satisfy needs and wants. To show how wealthy they are. To gain more income.
Why do people save? To pay for expensive goods. "For a rainy day" For retirement. Habit.
Why do people borrow? In order to buy goods and services which are too expensive.
What are the 5 types of saving? Cash Isas - Interest is earned tax free. Regular savings account - good for developing a savings habit. Instant access savings account - High interest rates. Notice accounts - High interest rates. National savings account - safe.
What are the 7 types of borrowing? Friends and Family, Banks, Credit Cards, Store cards, Charge cards, Mortgage, Payday loans
What does surplus mean? There is an excess of supply / demand.
What does deficit mean? There is not enough supply / demand.
What is The Basic Economic Problem? Wants are unlimited, the resources needed to manufacture these are limited.
What is the difference between scarcity and a shortage? A shortage is when the demand for a product is higher than the supply. Scarcity is when wants for a product is higher than the supply
What is effective demand? People are willing and able to buy a product.
What is a "Free good"? Goods that do not have a price because there is enough to satisfy everyone. (fresh air)
What is an Opportunity cost? The benefit you lose as a result of making a decision. Can also be known as "real cost"
What choice do consumers have to make? What to buy.
What choice do Producers have to make? What to produce.
What choice do the government have to make? What services to provide.
What is an Economy? Where people make/produce goods and services. It can be local, regional, national or international.
What is a Market? Where buyers and sellers come together in order to agree a price and exchange.
What are the 4 types of resources? Land, Labour, Capital and Enterprise.
What is Land? Natural resources, (land, minerals, sea)
What is Labour? The human effort that is directed towards producing goods and services, (manual, mental)
What is Capital? Man-made resources, (Factories, machinery)
What is Enterprise? The decision making / risk taking by an entrepreneur.
What is Geographical mobility? Resources can change place.
What is occupational mobility? Resources can change use.
What is Demand? The willingness of consumers to buy goods.
What is Effective Demand? The quantity of goods and services that people are willing and able to buy.
What is Quantity demanded? Effective demand at a given price
What is individual demand? The demand of 1 consumer
What is Market demand? The demand of all consumers in a given market
What is a demand schedule? A table showing quantity demanded.
What is a demand curve? A graph plotting data from the demand schedule.
What is utility? The satisfaction of consuming a good.
What is marginal utility? The extra satisfaction that you get as a result of consuming 1 extra unit.
What happens to the demand curve when demand rises? The graph moves right.
What happens to the demand curve when demand falls? The graph moves left
What are the non-price determinants of demand? Disposable income, Prices of other goods, Trends and Fashion, Number of consumers (age distribution), weather, Interest rates.
What is Supply? The quantity of goods and services that firms are able and willing to produce at a given price.
What causes a movement along the supply curve? A change in supply as a result of a change in price.
How does competitive supply effect supply? A firm deciding to change what they supply.
How does joint supply effect supply? A rise in price of a good might increase the supply of joint products.
How do costs of production effect supply? A fall in the cost of any factor of production will lead to an increase in the supply.
How does Government Intervention effect supply? The government intervene in markets through indirect taxes - VAT.
How does technology effect supply. As technology improves production can become more efficient.
What causes a shift in the supply curve? A non price determinant
What would an increase in price effect supply? An extension of supply.
What would cause a contraction on the supply curve? A decrease in price.
What is specialisation? Resources are used for their best suited productive activity.
What are the benefits of using specialisation? It increases productivity. Reduced unit costs of production. Efficient use of scarce resources.
What are the advantages of 'Division of labour"? Increased productivity - increased income Workers work in the job they are best at - most satisfaction
What are the disadvantages of "Division of Labour"? Increased risk of unemployment, interdependence, monotony.
What is the short run? The period of time when the capacity of the firm is fixed.
What is a worldwide market? When a single world price can be established. For example (oil, wheat, cotton, copper)
What is a localised market? Prices will vary from area to area. For example (The housing market)
What do markets have in common with each other? There is something to be exchanged, buyers, sellers, and a price.
What is a free market? When there are no barriers to firms competing with each other. The price is set by the total demand and supply. There is no government intervention.
What is the equilibrium price? When both the quantity demanded and supplied are the same. The market is cleared (no shortage.. unsatisfied customers, no unsold supplies.)
How will suppliers react to unsold stock? By cutting production and reducing price
What happens when there is a shortage? Consumers will compete with each other by offering to pay a higher price.
What would cause a rise in the equilibrium price? A rise in demand or a fall in supply. (supply curve shifts to the left) (also a contraction of supply)
Why do governments intervene in markets? To alter the price / quantity exchanged.
How do governments intervene? Imposing a tax, setting a maximum price below the equilibrium, or offering a subsidy
What is a subsidy? A sum of money paid out by the government in order to help an industry keep prices low.
Why would the government set a maximum price below equilibrium? They feel the equilibrium price is too high. To help low income consumers.
Created by: StudyMore6outof7
 

 



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