IGCSE Economics Flashcards

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Questions and Answers

What is opportunity cost?

The cost of choosing one thing over the next best alternative (correct)

The total cost of goods and services produced

The cost associated with fixed costs

None of the above

What is the economic problem?

The idea that resources are scarce and wants are unlimited

What is an economy?

Where people produce goods and services

What is a market?

Where a group of people willing to exchange goods and services meet Signup and view all the answers

What defines a perfect market?

Neither consumer nor producer solely influence the price charged for goods and services Signup and view all the answers

What characterizes an imperfect market?

A powerful consumer or producer can influence prices Signup and view all the answers

What are the four factors of production?

Land, Capital, Labour, Enterprise Signup and view all the answers

What are consumer goods?

Products bought by consumers to satisfy their wants Signup and view all the answers

What are the two types of consumer goods?

Durable consumer goods and non-durable consumer goods Signup and view all the answers

What are capital goods?

Man-made resources produced by labor that can help in the production of other goods and services Signup and view all the answers

What are public goods?

A good offered by the government since no private firm would be willing to produce it Signup and view all the answers

What are merit goods?

A good/service offered by the government since it feels that people need them regardless of their ability to pay Signup and view all the answers

What is private wealth?

Goods and services owned by entrepreneurs and people in the private sector Signup and view all the answers

What is social wealth?

Goods and services owned by the government in the public sector Signup and view all the answers

What is national wealth?

Both private and social wealth Signup and view all the answers

What is earned income?

Money earned while working (wage/salary) Signup and view all the answers

What is unearned income?

Money generated from assets and wealth (no working required) Signup and view all the answers

What does resource allocation refer to?

How much factors of production are used in the production of a particular good/service Signup and view all the answers

What is an economic system?

Used to answer a country's three economic questions: what, how, and for whom. Signup and view all the answers

What is the free market system?

Both producers and consumers determine what and for whom they produce goods Signup and view all the answers

What is the main aim of entrepreneurs?

Profit Signup and view all the answers

What is the price mechanism?

Used by entrepreneurs to decide what to produce Signup and view all the answers

How is average product calculated?

= total product / units of labour Signup and view all the answers

What is a primary industry?

Raw materials are obtained, farming mostly Signup and view all the answers

What is a secondary industry?

Where materials are processed into goods and services, in factories Signup and view all the answers

What is a tertiary industry?

When goods and services are then sold, shops etc. Signup and view all the answers

What is specialization?

When a country is good at producing a certain good/service Signup and view all the answers

What is division of labor?

When a workforce is separated for each to do a specific task in producing a good or service Signup and view all the answers

What is marginal product?

= Change in total product / change in total labour Signup and view all the answers

What does the law of diminishing returns state?

Adding more units of factors of production gives diminishing results to total product Signup and view all the answers

What are increasing returns?

When added factors of production increase total output Signup and view all the answers

What are fixed costs?

Costs that do not change as output changes Signup and view all the answers

What are variable costs?

Costs that increase per increasing output Signup and view all the answers

What are total costs?

Both fixed and variable costs Signup and view all the answers

How are average costs calculated?

= total costs / output Signup and view all the answers

What is total revenue?

The price of goods multiplied by the quantity of goods Signup and view all the answers

How is average revenue calculated?

= total revenue / output Signup and view all the answers

What is the break-even point of production?

The point of production when total costs are equal to total revenue Signup and view all the answers

What is depreciation?

Capital equipment used in a firm wears out and needs to be replaced Signup and view all the answers

What is the optimum point of production?

The average cost of producing a good/service is at its lowest level possible Signup and view all the answers

What are increasing returns to scale?

A company doubles its inputs and more than doubles its outputs Signup and view all the answers

Study Notes

Economic Concepts

Opportunity Cost: Represents the value of the next best alternative that is forfeited when making a choice.
The Economic Problem: Highlights the fundamental issue of scarce resources versus unlimited wants.
Economy: A system where goods and services are produced and exchanged by individuals and businesses.

Markets and Production

Market: A venue where buyers and sellers engage in the exchange of goods and services.
Perfect Market: A scenario where neither consumers nor producers can manipulate the market price of goods and services.
Imperfect Market: Occurs when a single powerful consumer or producer can influence market prices.
The Four Factors of Production: Includes Land, Capital, Labour, and Enterprise, each essential for producing goods and services.

Goods and Services

Consumer Goods: Products that are purchased by individuals to satisfy personal wants and needs.
Types of Consumer Goods: Distinct categories include durable goods (long-lasting) and non-durable goods (short-lived).
Capital Goods: Man-made resources that facilitate the production of other goods and services.
Public Goods: Goods provided by the government that are not typically produced by private firms due to lack of profitability.
Merit Goods: Services provided by the government based on societal need, regardless of consumers' ability to pay.

Wealth Concepts

Private Wealth: Refers to the assets owned by individuals or businesses in the private sector.
Social Wealth: Encompasses goods and services owned by the government in the public sector.
National Wealth: The total of both private and social wealth within a nation.

Income Types

Earned Income: Money received from labor or work, such as wages and salaries.
Unearned Income: Revenue generated from assets, requiring no active work, such as interest or dividends.

Resource Allocation

Resource Allocation: The distribution of factors of production in the creation of specific goods and services.
Economic System: Framework for addressing a country's fundamental economic questions: what to produce, how to produce, and for whom to produce.

Market Mechanisms

Free Market System: An economic structure where producers and consumers dictate the production of goods.
Price Mechanism: A tool utilized by entrepreneurs to determine production decisions based on consumer demand.

Production Metrics

Average Product: Calculated as total product divided by the number of labor units used.
Marginal Product: Represents the additional output obtained from increasing inputs, calculated as the change in total product divided by the change in labor.
Fixed Costs: Expenses that remain constant regardless of output levels.
Variable Costs: Costs that increase in proportion to the level of output produced.
Total Costs: The sum of fixed and variable costs incurred in production.

Revenue and Profit

Total Revenue: The overall income from sales, computed as price per unit multiplied by quantity sold.
Average Revenue: Total revenue divided by the total output produced.
Break-Even Point: The production level at which total costs equal total revenue, resulting in no net loss or gain.
Optimum Point of Production: The production level where average costs are minimized.

Returns and Economic Principles

Law of Diminishing Returns: Suggests that adding more factors of production will eventually yield lower additional output.
Increasing Returns: Indicates a scenario where increasing production inputs results in a more than proportional increase in outputs.
Increasing Returns to Scale: Describes a situation where doubling inputs leads to more than double the output.

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Description

This set of flashcards covers essential economic concepts relevant to the IGCSE Economics curriculum. Each card defines key terms such as opportunity cost, the economic problem, and market dynamics. Perfect for students looking to reinforce their understanding of economic principles.