Free VCE Year 11 Economics Flashcard Review
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What is microeconomics?
The study of individual economic agents and markets.
What is macroeconomics?
The study of the whole economy: output, unemployment, inflation and growth.
Positive vs normative
Positive is testable fact; normative is a value judgement about what ought to be.
Name the three factors of production.
Land, labour and capital.
Define relative scarcity.
Limited resources compared with unlimited wants, forcing choices.
Define opportunity cost.
The next best alternative given up when a choice is made.
What does a point inside the PPF show?
Under-utilisation of resources, for example unemployment.
Why is the PPF bowed outward?
Increasing opportunity cost, because resources are not equally suited to both goods.
What are the three basic economic questions?
What and how much to produce, how to produce, for whom to produce.
Who answers the questions in a planned economy?
The central government, through a plan.
What does the traditional model assume about consumers?
They are rational, self-interested, informed and maximise utility.
What is the traditional objective of business?
Profit maximisation.
State the law of demand.
As price rises, quantity demanded falls, ceteris paribus; the demand curve slopes downward.
State the law of supply.
As price rises, quantity supplied rises, ceteris paribus; the supply curve slopes upward.
What causes a movement along a demand curve?
A change in the good's own price.
Name six non-price factors that shift demand.
Disposable income, prices of substitutes, prices of complements, tastes and preferences, interest rates, population and demographics, consumer confidence.
Name five non-price factors that shift supply.
Costs of production, technology, productivity, climatic conditions and other disruptions.
What happens to equilibrium if demand increases?
Equilibrium price and quantity both rise.
What happens to equilibrium if supply decreases?
Equilibrium price rises and equilibrium quantity falls.
What is a surplus?
Quantity supplied exceeds quantity demanded at a price above equilibrium; price falls.