Studied by 6 peoplegood
tangible product
service
intangible product
consumer
person, firm or organisation who directly uses a good or service
producer
individual or firm or country that makes, supplies grows a good or service
government
political authority that decides how a country should be run and manages its operations
interdependence
when one group responds to or is affected by the actions of another
factors of production
resources that can be used in an economy to produce goods and services
land
natural resources available for production
labour
human input into the production process
enterprise
organises the factors of production and take risks
capital
man-made aids to production
scarcity
when there are insufficient resources to satisfy all wants
unlimited wants
infinite desire for something
needs
something a consumer has to have to survive
wants
something a consumer would like to have which is not required for survival
economic problem
how best to use limited resources to satisfy unlimited wants
economic choice
option for the use of scarce selected resources
opportunity cost
value of the next best alternative foregone
economic sustainability
how best to utilise scarce resources in order to create responsible development, now and into the future
social sustainability
impact of development or growth that promotes an improvement in quality of life for all, now and into the future
environmental sustainability
impact of development or growth where the effect on the environment is small and possible to manage, now and into the future
market
way of bringing together buyers and sellers in order to buy and sell goods and services - involves specialisation
market economy
economy in which scarce resources are allocated by market forces of supply and demand
primary sector
extraction of raw materials
secondary sector
manufacture and construction
tertiary sector
goods and services
factor market
where the services of factors of production are bought and sold
product market
where final goods and services are sold
specialisation
the process by which individuals, firms, regions and whole economies concentrate on producing the product they are best at
exchange
the act of giving up something the individual or firm has for something they want but do not possess
division of labour
where workers specialise or concentrate on one area of the production process
demand
the willingness and ability to purchase a good or service at a given price in a given time period
individual demand
demand for a good or service by an individual consumer
market demand
total demand of all consumers for a good or service
law of demand
for most products, quantity sold varies inversely with price
price elasticity of demand
responsiveness of quantity demanded due to a change in price
elastic demand
where percentage change in quantity demanded is greater than percentage change in price
inelastic demand
where percentage change in quantity demanded is smaller than percentage change in price
supply
willingness and ability of producers to supply a good or service at a given price in a given period of time
individual supply
supply of a good or service by an individual producer
market supply
total value of all individual supply added together
law of supply
quantity supplied varies directly with price
price elasticity of supply
responsiveness of quantity supplied due to a change in price of the product
elastic supply
when percentage change in quantity supplied is greater than the change in price
inelastic supply
when percentage change in quantity supplied is less than percentage change in price
price
sum of money you have to pay for a good or service - determined by market forces of supply and demand
worth
value placed on a good or service by an individual
allocation of resources
how scarce resources are distributed amongst producers and how scarce goods and service are distributed amongst consumers
determination of price
interaction of the free market forces of supply and demand to establish a general price level for a good or service
equlibrium price
where quantity supplied exactly matches quantity demanded
market forces
factors that determine price levels and the availability of goods and services in an economy without government intervention
price signalling
price changes signal where resources are needed, if demand for a good rises, its price will rise, signalling more resources should be devoted to producing this good
transmission of preferences
higher prices encourage the business to produce more businesses profit from producing what consumers want
rationing
prices help ration scarce resources - when resources are scarce, prices rise, so only those willing and able to pay are allocated these resources
competition
when different firms are trying to sell a similar product to a consumer
monopoly
sole producer of a good or service - legally if they own 25% of the market
oligopoly
where a small number of firms dominate a market
production
total output of goods and services produced by a firm or industry in a given time period
productivity
output per unit of input - efficiency in use of factors of production
fixed costs
costs that do not change with output
variable costs
costs that vary with output
average cost
cost of producing one unit
calculating average costs
total cost/output
total revenue
total income of a firm from the sale of goods and services
calculating total revenue
price x quantity sold
average revenue
revenue per unit sold
calculating average revenue
total revenue / quantity sold
profit
amount of money a producer is left with after all costs have been paid - when total revenue is greater than total cost
loss
when a firm's revenue is less than its costs
economies of scale
cost advantages a firm can gain by increasing the scale of production., leading to a fall in average costs
internal economies of scale
due to the growth of the firm itself
external economies of scale
those a firm benefits from as a member of an industry or those which are outside of its control
labour market
where workers sell and employers buy labour - interaction of the two gives the price of labour (wage rate), and quantity supplied and demanded
derived demand
when the demand for labour depends on the demand for the product the labour helps to produce
gross pay
the amount of money an employee earns before taxes and other deductions are made
net pay
amount of money an employee receives after deductions are made from gross income
income tax
tax directly levied on personal income
national insurance
contribution paid by workers and their employers towards state benefits
pension
fixed amount paid at regular intervals to a usually retired person
money
anything generally accepted as a means of payment - a medium of payment
financial sector
consists of financial organisations and their products, involves the flow of capital
medium of exchange
anything that sets the standard value of goods and services and is acceptable to all involved in the transaction
building society
a mutual financial institution that is owned by its members with the objective to receive deposits from its members and lend money to other members to purchase property
insurance company
financial institution that guarantees compensation for a specified loss, damage, illness or death in return for an agreed premium
credit provision
credit is when consumers, producers and government can borrow money to buy goods and services without having to save up
liquidity provision
liquidity - how easy it is to turn an asset into cash - bank allows consumers and producers to function when faced with unexpected demands for cash by offering loans and overdrafts
risk management
finance managers group many savers together and invest into a range of companies - individual investors would not be able to do this on their own and would invest in a smaller range of companies, increasing risk
mortgage
agreement with a financial institution to borrow money to purchase a property
interest rates
cost of borrowing and reward for saving
investment
the purchase of capital in order to produce future goods and services
gross domestic product
total value of goods and services produced in a country in a year
economic growth
growth in the value of output over time
GDP per capita
GDP / population
recession
period of negative economic growth for two or more consecutive quaters
boom
period of high economic activity and employment
labour force
number of people who work in an economy
employment
use of labour in the economy to produce goods and services
unemployment
occurs when workers willing and able to work at the current wage rates are not able to find employment
claimant count
method of measuring unemployment according to the number of people claiming unemployment-related benefits
level of unemployment
number of people in the working population who are unemployed
Note
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