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Summary AS Level OCR Micro Economics Flashcards
Printable Flashcards for AS OCR Micro Economics Diagrams, images and colour
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Money Economic AgentsThe problem with a barter economy is that a transaction
Households: to receive the greatest amount of
requires a double coincidence of wants. Both want
satisfaction or utility from consuming a product.
Money acts as a medium of exchange. to maximise
Firms: to make a profit from their activities.
Both buyer and seller must accept money, to do this money
Government: to raise revenue so that it can fulfil its
must be a store of value so wealth can be stored for future
expenditure program and provide a framework for a
transactions.
stable economy for the benefit of its citizens.
Money also allows comparison of the value society places on
certain assets as it is a unit of account.
It’s also a standard of deferred payment.
The Economic Problem Economic Systems
An economy's finite resources are insufficient to satisfy all
human wants and needs. It assumes that human wants are
unlimited, but the means to satisfy human wants are scarce.
Economies face a choice on what should be produced. These
choices usually incur an opportunity cost.
A good which incurs an opportunity cost is an economic good
one which does not is called a free good.
Factors of Production
Land – natural resources, renewable and non-renewable.
Labour – the workforce: skilled (doctors), semi-skilled
(electrician) and unskilled (supermarket worker).
Capital – resources used to produce goods and services.
Enterprise – use other resources to provide goods and
services, driven by profit.
Production Possibility Frontier Economies of Scale
It is the visual representation of opportunity cost. Technical: the ability to buy more specialist machines spreads
It depicts a trade-off between two goods. fixed costs over greater output.
Consumer goods – goods which can fulfil consumers needs or Purchasing: the ability to buy in large quantities reduces the
wants. cost per item.
Capital goods – goods which can be used to produce other Managerial: where a business employs specialist staff in
goods and services. certain areas boosts productivity.
Financial: large companies can borrow at cheaper rates due to
If capital goods are reduced risk for the lender.
produced with priority Diseconomies of scale can occur
overtime the PPF may due to communication barriers
shift right. and coordination problems.
They cause the average cost to
increase with output.
Production Costs
Specialisation – where production is focused limited scope of
products to gain greater degrees of productive efficiency.
Exchange – the exchange of services for goods or currency.
Production – converts factors of production into a final
output. Refers to the total output of products.
Higher productivity leads to:
• Lower average costs,
• Increased competition (economic growth).
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