Econ0002 term 1 QUESTIONS AND ANDWERS ALREADY PASSED
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Course
ULC ECONS
Institution
AQA
What is the 90/10 ratio? - ANS average income of the richest 10% divided by the average income of the
poorest 90%
What does disposable income not measure? - ANS quality of social and physical environment, amount
of free time, goods and services you can't buy, goods and services that are produced...
econ0002 term 1 questions and andwers already pass
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AQA
ULC ECONS
ULC ECONS
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Econ0002 term 1 QUESTIONS AND
ANDWERS ALREADY PASSED
What is the 90/10 ratio? - ANS average income of the richest 10% divided by the average income of the
poorest 90%
What does disposable income not measure? - ANS quality of social and physical environment, amount
of free time, goods and services you can't buy, goods and services that are produced within the
household
How to calculate nominal gdp? - ANS sum of (price of good i x quantity of good i)
How to calculate real gdp? - ANS multiply prices from base year by quantities for year of measurement
How do we compare living standards across countries? - ANS use estimates of GDP per capita in a
common set of prices (purchasing power parity PPP prices). Because exchange rates stop you comparing
countries accurately
What is the ratio scale? - ANS With GDP per capita doubling up the vertical axis
what is the ratio scale used for? - ANS comparing growth rates
What does a steeper line in the ratio scale chart mean? - ANS Faster growth rate
growth rate = - ANS change in income/original level of income
what does a growth rate of 100% mean? - ANS level of income doubles
,What is technology in economics? - ANS a process that takes a set of materials and other inputs,
including the work of people and machines, and creates an output
Examples of hockey stick graph - ANS Gross domestic product per capita, productivity of labour,
connectivity of the various parts of the world, impact of the economy on the global environment
What is a centrally planned economic system? - ANS The government controls production and decides
how goods should be distributed, and to whom
What does a market economy consist of? - ANS Private property and markets
What does a capitalist economy consist of? - ANS Private property, markets and firms
What is absolute advantage? - ANS If the inputs to produce a good are less than in some other person
or country
What is comparative advantage? - ANS If the cost of producing an additional unit of a good relative to
the cost of producing another good is lower than another person or country's cost to produce the same
two goods
Explanations for why capitalism is less dynamic? - ANS private property is not secure (weak
enforcement of the law or expropriation), markets are not competitive, firms owned by people only
because of connections
How can firms stay ahead of the competition in capitalist economies? - ANS By constantly innovating
How do governments help economies work? - ANS They adjudicate disputes over ownership and
enforce property rights necessary for markets to work
, Why is an equilibrium at subsistence level an equilibrium? - ANS Because movements away from
subsidence income are self-correcting
Average product of labour = - ANS total output/total number of workers
What does a production function describe? - ANS the relationship between the amount of output
produced and the amount of input used to produce it
What is diminishing average product of labour? - ANS Where as more labour is used in a given
production process, the average product of labour falls
What can diminishing average product of labour be caused by? example - ANS More labour devoted to
a fixed quantity of land or more (inferior) land bought into cultivation
malthus's model - ANS diminishing average product of labour and increased living standards created
population increase which both led to Malthusian trap
what variables stay constant in the malthus model equilibrium? - ANS size of population, income of
population
What is subsistence level? - ANS The level of living standards (measured by consumption or income)
such that the population will not grow or decline
What does Malthus' model predict? - ANS improvements in technology will not raise living standards if
the average product of labour diminishes as more labour is applied to a fixed amount of land, or
population grows in response to increases in real wages
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