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Economics - Coggle Diagram
Economics
Types of economy
Market- Resources allocated through market forces (supply and demand) rather than through government planning.
Mixed economy- Resources are allocated partly through market forces and partly through government intervention
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Adv Market economy= Increase competition-> Firms want to max. profit-> innovation-> Increase quality and increase choices - househoulds want to max. utilities
Disadv= Market failure-> Negative externalities in production -> Ie air pollution from factories -> External cost on society -> Increase causes of asthma-> Increase cost of healthcare-> Decrease GPI= decrease econ. growth/ development
Adv planned economy= Equal distribution of income + wealth-> All citizens have access to goods + services-> Allows them to max. utilities
Disadv= Decrease level of competition-> decrease in quality and choice due to lack of innovation and especially due to no profit motive-> households do not max. utilities
Adv mixed economy= Increase choice and quality due to competition-> leading to innovation-> firms max. profit and households can max. utility
Disadv= May not fully correct market failures-> overconsumption of demerit goods- negative externalities in consumption (ie fizzy drinks)-> sugar tax-> people still consume despite increase price-> welfare loss to society
Factors of production= An economy converts inputs/ resources (factors of production) into output ( goods and services)
Capital- Machinery, reward= interest
Entrepreneurship- Other 3 factors tied into an idea, reward= profit
Labour- Workforce, reward= wage
Land- Raw materials, reward= rent
Specialisation- A system of organisations where units are not self- sufficient but concentrate on producing certain goods and services
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Advanatges= Increase quality as workers are specialised. Reduce production time helps to increase output and can solve BEP. Economies of scale= Increase output and decrease average cost- bulk buy
Disadvantages= Increase number of workers means an increase in wages= Whole production line may stop if there is an issue. The process is repetitive and the productivity will be low which means a high labour turnover.
Specialisation via division of labour= Increase output-> surplus achieved-> export surplus-> Receive other goods / services in exchange-> Outward shift of PPF due to trade
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Positive statements- Facts. These statements can be empirically tested to see whether they are true or false
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Basic economic problem= Resources have to be allocated between competing uses because want are infinite but resources are finite
Scarcity= Economic agents can only obtain a limited amount of resources at a time. CHOICES HAVE TO BE MADE
Free goods= Unlimited in supply and have no opp. cost
Cost goods= Scarce goods as their use has an opp. cost
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Shifts in PPF- Caused by changes in the quantity and or quality of the factors of production. IE- Improved quality= Outward shift