Economics General Ones

Question	Answer
Define 'goods' and 'services'.	Goods - Tangible products. Services - Intangible products.
Name the 2 main rationing systems that are dealt with in economics.	Planned economies and free market economies.
Name 5 disadvantages of a free market economy.	1. Over-provision of demerit goods. 2. Under-provision of merit goods. 3. Vulnerable members of society will be unable to survive. 4. Likely domination of large firms could lead to high prices, loss of efficiency & excessive power. 5. Driven by ^profits and minimising costs, resources may be used up too quickly, causing damage to environment.
Name 5 disadvantages of a planned economy.	1. Too complicated to plan, leading to misallocation, shortages & surpluses. 2. Resources won't be used efficiently due to lack of price system. 3. Distorted/lack of incentives lead to loss in quality/output. 4. Dominance of gov. may lead to loss of liberty & freedom of choice. 5. Gov. not sharing same aims as majority of population can implement corrupt & unpopular plans.
Define national income.	The value of all the G&S produced in an economy in a given time period (norm. 1yr).
Define 'real'.	Something adjusted for inflation.
Define potential growth.	Where there is an improvement in the quality and/or quantity of FOPs & an outward shift of the PPF to a point that is nearer to the curve.
Outline the difference between economic growth and development.	Economic development is a measure of the welfare of an economy.
Define sustainable development.	Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Define 'Elasticity'.	A measure of responsiveness i.e. how much something changes when there is a change in one of the factors that determines it.
Define 'Elasticity of demand'.	A measure of how much the demand for a product changes when there is a change in one of the factors that determine demand.
Name the types of elasticities of demand that there are to consider.	Ped Xed Yed
Define Ped.	A measure of how much the quantity demanded of a product changes when there is a change in the price of the product.
If Ped is equal to 0, then a change in the price of a product will have what kind of effect on the quantity demanded?	A change in price will have no effect.
If Ped is equal to infinity, then a change in the price of a product will have what kind of effect on the quantity demanded?	A change in price will lead to a greater than proportionate change in the quantity demanded of it.
If a firm has inelastic demand for its product, to raise revenue they should..?	Raise the price of the product.
If a firm has elastic demand for its product, to increase revenue they should..?	Not raise the price.
Define 'Xed'.	A measure of how much the demand for a product changes when there is a change in the price of another product.
What is the difference between the range of values for Ped & Xed?	Ped can be anything from 0-infinity: Ped = 1 > 0 - inelastic; Ped = > 1 - Elastic. Xed can be any value and is either positive or negative: +ive - 2 Gs are substitutes; -ive - 2 Gs are compliments. 0 - 2 Gs are unrelated.
Define 'Yed'.	A measure of how much the demand for a product change when there is a change in the consumer's income.
State the values that Yed can have and their significance.	Yed can be +ive & -ive. When Yed = 0-1, it's inelastic. When Yed <1, it's elastic. Necessity Gs - Low income elasticity. Superior Gs - High Y elasticity. Inefrior Gs - Yed is -ive.
Name 3 determinants of Ped.	1. No. & closeness of substitutes. 2. Necessity of the product & how widely it is defined. 3. Time period considered.
Define 'Pes' (Price Elasticity of Supply).	A measure of how much the supply of a product changes when there is a change in its price.
What is the range of values adoptable by Pes?	0 - infinity, and aren't hypothetical like Ped.
When Pes = 0, a change in the price of the product will have what effect on the quantity supplied?	No effect on the quantity supplied.
When Pes is infinite (perfectly elastic), if price falls, what effect will it have on the supply of the product?	The supply of the product will fall to 0, an infinite change.
When the value of Pes is less than 1 and more than 0, a chang in price leads to..	..a less than proportionate change in the quantity supplied of it. (inelastic supply)
When the value of Pes is greater than 1 and less than infinity, a change in the price leads to..	..a greater than proportionate change in the quantity supplied of it. (Elastic supply)
Define 'unit elastic supply'.	The value of Pes is 1, and a change in price leads to a proportionate change in the quantity supplied of it.
What are the two determinants of Pes?	1. How much costs rise as output is increased. 2. Time period considered.

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