Free HSC Year 11 Economics Flashcard Review
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Define economics.
The study of how people, businesses and governments choose to use scarce resources to satisfy unlimited wants.
What is scarcity?
The gap between unlimited wants and limited resources.
Name the three economic agents.
Consumers (households), producers (businesses) and government.
Define opportunity cost.
The value of the next best alternative forgone when a choice is made.
State the cost-benefit principle.
Proceed with an action only if its benefits exceed its costs; marginally, continue until marginal benefit equals marginal cost.
Name the four factors of production and their incomes.
Land (rent), labour (wages), capital (interest), entrepreneurship (profit).
List the key questions every economy answers.
What, how and how much to produce, and for whom (distribution).
How does a mixed market economy answer them?
Mostly through markets and prices, with government providing public goods, regulation and redistribution.
Give two functions of money.
Medium of exchange and store of value (also unit of account and standard of deferred payment).
What does a point inside the PPF show?
Unemployed or underemployed resources; the economy is producing less than it could.
State the equilibrium condition in the circular flow.
S + T + M = I + G + X (leakages equal injections).
Name the four stages of the business cycle.
Expansion (upturn), peak, contraction (downturn) and trough.
What are the three functions of relative prices?
Signalling (shows scarcity), incentive (rewards or discourages behaviour) and rationing (allocates scarce goods to those willing and able to pay).
Difference between product and factor markets?
Product markets: households buy goods and services from businesses. Factor markets: businesses buy labour, land, capital and entrepreneurship from households.
State the law of demand.
Other things equal, as price rises quantity demanded falls, giving a downward-sloping demand curve.
Name factors that shift the demand curve.
Income, population, tastes and preferences, prices of substitutes and complements, and expected future prices.
Name factors that shift the supply curve.
Cost of factors of production, expected future prices, number of suppliers and technology.
What happens to price and quantity if demand increases?
Both equilibrium price and equilibrium quantity rise.
How is PED calculated?
PED = % change in quantity demanded ÷ % change in price (ignore the sign).
List the five degrees of elasticity.
Perfectly inelastic (0), relatively inelastic (<1), unit elastic (=1), relatively elastic (>1), perfectly elastic (infinite).