Economics year 8

Year 8 Economics term 4 flash cards

Economics

The study of how people, businesses and governments use limited resources to satisfy their unlimited wants.

Factors of production

Land, labour, capital, enterprise

Land

Naturally occurring things that a business can use in producing a good or service.

Labour

Employees that a business needs to produce, develop and sell goods or services.

Capital

Money, machinery and buildings. Businesses use these to produce goods and services.

Enterprise

A business’s ability to combine land, labour, and capital to make a profit.

The economic problem

The economic problem is the problem of scarcity. The fact that resources are limited but human wants are unlimited.

Scarcity

There are not enough resources (land, labour, capital, entrepreneurship) to produce goods and services that everyone desires.

Choice

Because resources are scarce, we must decide what to produce, how to produce and for whom to produce.

Opportunity cost

Every choice involves giving up the next best alternative.

Economic questions

What to Produce?

How to produce?

How much to produce?

For whom to produce?

What to produce?

In a market economy, decisions on what to produce are determined by consumer demand and the price mechanism. Producers respond to consumers’ preferences and willingness to pay, adjusting production based on profitability.

How to produce?

When producing goods or services, businesses will try to keep their costs as low as possible so that they will make more profit.

How much to produce?

In the market, the supply needs to be equal to the demand. If consumers like this good or service, they would produce more of this good.

For whom to produce?

An important part of resource allocation for businesses is knowing who they want to sell to.

Market

A market is a place (physical or online) where buyers and sellers come together to exchange goods or services. There are many markets in Australia. For example, there is the goods and services market, labour market, financial market, housing market etc.

Product market

Product market is a market where finished goods and services are bought and sold to consumers.

Factor market

A factor market is where resources (factors of production) such as labour, land, and capital are bought and sold.

Economic systems

Market economy

Mixed economy

Planned economy

Market economy

Market economy is an economy where decisions about production, pricing, and distribution are made by individuals and private businesses, not the government.

Mixed economy

A mixed economy combines features of both the market and planned systems. Both the government and private individuals make economic decisions.

Planned economy

A planned economy is an economic system where the government makes all economic decisions — what to produce, how to produce, how much to produce and for whom to produce.

Circular flow of income

The circular flow of income is a model that shows how money, goods, and services move between different parts of the economy.

It shows the relationship between households, firms, and the government.

Households

A household is made up of people who earn money, spend it on goods and services, and provide labour to businesses.

Firms

In economics, a firm is a business organisation that uses resources like labour, land, and capital to produce goods or services for sale.

Government

The government helps manage the economy by spending money, setting rules, and providing services like education, healthcare, and roads.

Government intervention

The government is involved in the market to correct problems that the market cannot solve efficiently on its own. One key role is providing goods and services that are underprovided by the private sector.

Buyers and sellers influences the allocation of resources

Buyers and sellers interact through demand and supply. The goods and services that people want most are produced, resources are used efficiently, and goods go to those who are willing and able to pay.

Law of Demand

As the price of a good or service rises, the quantity demanded decreases, and as the price falls, the quantity demanded increases, assuming all other factors remain constant.

Law of Supply

As the price of a good or service rises, the quantity supplied increases, and as the price falls, the quantity supplied decreases, assuming all other factors remain constant.

Surplus

A surplus happens when there is too much of a product because the price is too high and not enough people want to buy it.

Shortage

A shortage happens when there isn’t enough of a product because the price is too low and too many people want to buy it.

Equilibrium

Equilibrium is the point in a market where the quantity demanded equals the quantity supplied.

Market is not in equilibrium

When the market is not in equilibrium, buyers and sellers change their behavior to restore balance. If there is a surplus, sellers lower prices to increase sales. If there is a shortage, sellers raise prices until demand and supply are equal again.

Influences on the way people work

Rapid Communication Changes

Flexible work

Changing attitudes to work

Age of retirement