commerce
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55 Terms
economics
the study of human behaviour, and involves how individuals, families, businesses and governments make decisions/choices about how to use their limited resources in ways that best help to satisfy their basic needs and unlimited wants
need
a good or service that is deemed to be necessary for oneās survival
want
a good or service that is not necessary for oneās survival, but consumptions of which adds to the quality of oneās life
relative scarcity
the fundamental economic problem that arises because peopleās unlimited wants exceed the limited resources available from which to produce goods and services
trade-offs
the options we give up in order to obtain a particular product, experience or service that we want
opportunity cost
the value of the next best alternative that is foregone whenever a choice is made
an economy
a system within an area in which economic agents decide how to use scare resources so that goods and services can be produced and consumed
3 economic objectives
strong economic growth, low inflation, full employment
gross domestic product (GDP)
the total value of goods produced and services provided in a country during a period of time
GDP growth target
2%-3%
economic recession
when economic growth (GDP) falls for 2 or more quarters in a row
economic depression
classed as an extreme recession lasting 2 or more years
inflation
the increase in the general level of prices paid for goods and services over a certain time period
consumer price index (CPI)
used to track inflation by tracking the cost of a basket of everyday goods and services over time
the reserve bank of australia (RBA)
australiaās central bank that adjusts interest rates to control inflation
if inflation is too high
the RBA will increase interest rates, causing a rise in the cost of borrowing money
if inflation is too low
the RBA will cut interest rates, causing a fall in the cost of borrowing money
inflation rate target
2%-3%
unemployment
the share of the labour force that is without work but is avaible for and seeking employment
optimum employment rate for a healthy economic expansion
3.5%-4.5%
factors of production
the inputs that producers require to make goods and services, aka resources
land
a FOP; materials or resources that occur and are sourced from nature
labour
a FOP; the mental and physical efforts by humans in the production process
capital
a FOP; physical resources, items or materials that are man-made and used by a business to manufacture or sell good and services
capital human resource
knowledge of workers
entrepreneurship
a FOP; the skills and knowledge of those individuals who combine the other resources to produce goods and services, they take financial risks to establish businesses
2 main participants in the simplest economy
households (consumers) and businesses/firms (producers)
household sector
made up of individuals in the economy that provide labour in exchange and for income, and are consumers who buy goods and services from firms
firms sector
made up of all businesses in the economy that produce outputs that are sold to consumers to receive revenue, and they provide income to households
traditional economy
an economic system where customs, culture, and history shape production and trade
command economy
an economy where the government decides the jobs people have and what is sold & bought in the country
market economy
the market, companies and individuals decide the jobs people have and what is bought & sold in the country
mixed economy
a combination of 2/3 of the other economy types
the sector of the economy owned by private individuals, groups, or institutions
the sector of the economy owned by the government
business owners are fully responsible by law (if their business fails) to the extent of their personal assets
business owners are only personally responsible by law to the level of their original investment in the business
once an owner leaves, the business still exists
a private sector business structure owned and operated by one person
a private sector business structure owned by 2 to 20 people
a separate legal entity run by directors and owned by shareholders
a company owned by up to 50 shareholders where shares cannot be traded freely without permission (pty ltd)
a company with no upper limit on the number of shareholders whose shares are openly traded on the asx (ltd)
a profit driven public sector business owned by the government but managed separately
a process where management makes all the decisions and passes directions downwards without employee input
a process where employees are given the responsibility for decision making in their own areas
a task-focused management style where there is top-down communication, centralised decision making and a strong need for control and authority
an employee-focused management style where the manager seeks employee opinions through two-way communication before making the final decision
an employee-focused management style where there is two-way communication and management and staff work together as a team to make decisions
the shared values and beliefs of the people within a business that can be summed up as āhow we do things around hereā
the set of values and beliefs that a business wants to present to the public
the actual prevailing values and beliefs within a business