Economics Key Terms

Consumer

A person or organization that directly uses a good or service

Good

A tangible product i.e. a product that can be seen or touched

Government

A political authority that decides how a country is run and manages its operation

Producer

A person, company, or country that makes, grows, or supplies goods and/or services

Service

An intangible product i.e. a product that cannot be seen or touched

Factors of production

The resources in an economy that can be used to make goods and services (CELL)

Labour

The factor of production concerned with the workforce of an economy

Land

The factor of production concerned with natural resources of an economy

Capital

The factor of production that relates to the human made aids to production e.g. machinery

Enterprise

The Factor of production that takes a risk (the entrepreneur) in organising the other 3 factor of productions

Interdependent

How factors are reliant on one another

Scarce Resources

When there is an insufficient amount of something to satisfy all wants

Unlimited wants

The infinite desire for something

Need

Something a consumer has to have to survive e.g. water/food

Want

Something a consumer would like to have but which is not essential for survival

Economic problem

How to best use limited resources to satisfy the unlimited wants of people

Opportunity cost

The next best alternative given up when making a choice

Economic choice

An option for the use of selected scarce resources

Economic sustainability

The best use of resources in order to create responsible developmnet or growth that promotes an improvement in quality of life for all, now and into the future

Social Sustainability

The impact of development or growth that promotes an improvement in quality of life for all, now and into the future

Enviromental sustainability

The impact of development or growh where the effect on the enviroment is small and possible to manage, now and into the future

Market

A way of bringing buyerd and sellers to buy and sell goods and services

Market economy

An economy in which scarce resources are allocated by the market forces of supply and demand

Primary sector

The direct use of natural resources such as the extraction of basic materials and goods from land and sea

Secondary sector

All activities in an economy that are concerned with either manufacturing or construction

Tertiary sector

All activities in an economy that include the idea of a service

Factor market

Market in which the services of the factors of production are bought and sold

Product market

Market in which final goods and services are offered to consumers, buisnesses and the public sector

Exchange

The giving up of something that the individual or firm has, in return for something they wish to have but do not possess

Specialisation

The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing

Division of labour

Where workers specialise in, or concentrate on one area of the production process

Demand

The willingness and ability to purchase a good or service at the given price in a given period of time

Individual demand

The deman for a good or service by an individual consumer

Law of demand

For most products the quantity demanded varies inversely with its prices

Market demand

The total deman for a good or service found by adding together all individual demands

Movement along the demand curve

When the price changes, leading to a movement up (expansion) or down (contraction) the existing demand curve

Shift of the demand curve

A complete shift of the existing demand curve either to the right (increased demand) or to the left (decreased demand)

Sunsidy

An amount of money the government gives directly to firms to encourage production and consumption

Tax

A compulsory payment to the government

Elastic demand

When the percentage change in quantity is greater than the percentage change in price (price sensitive customers)

Inelastic demand

When the percentage change in quantity demanded is less than the percentage change in price (customers are not price sensitive)

Price elasticity of demand (PED)

The responsiveness of quantity demanded to a change in price of a product

Law of supply

For most products the quantity supplied varies directly with its price

Supply

The ability and willingness of firms to provide good and services at each price in a given time period

Individual supply

The supply of a good or service by an individual producer

Market supply

The total supply of a good or service as a result of adding together all individual producers supplies

Movement along the supply curve

When the price changes, leading to a movement up (expansion) or down (contraction) on the existing supply curve

Shift of the supply curve

The complete shift of the existing supply curve either to the right (increased supply) or to the left (decreased supply)

Elastic supply

When the percentage change in quantity supplied is greater than the percentage change in price

Inelastic supply

When the percentage change in the quantity supplied is less than the percentage change in price.

Price elasticity of supply (PES)

The responsiveness of quantity supplied to a change in the price of the product

Price

The sum of money you have to pay for a good or service. It is determined by the interaction of supply and demand

Efficiency

The optimal production and distribution of scarce resources

Equilibrium price and quantity

Where the quantity supplied exactly matches the quantity demanded

Allocation of resources

How scarce resources are distributed among producers, and how scarce goods and services are allocated among consumers

Determination of price

The interaction of the free market forces of demand and supply to establish the general level of price for a good or service

Market forces

Factors that determine price levels and the availability of goods and services in an economy without government intervention

Competition

Where different firms are trying to sell a similar product to a consumer

Monopoly

A sole producer or seller of a good or service

Oligopoly

Where a small number of firms control the large majority of market share

Profit

The amount of money left after all costs have been paid total revenue - total costs

Productivity

A measure of efficiency in the use of factors of production in the production process. The output per unit of input

Average cist

The cost of producing a unit - unit cost of production total cost/nmber of units

Total cost

All the costs of the firm added together

Total revenure

The total income of a firm from the sale of its goods or service selling priced x number of items sold

Average revenue

The revenue per unit sold total revenue/number of units sold

Loss

When a firm's revenue is less than its costs

Economies of scale (Internal EOS)

The cost advantages a firm can achieve by increasing the scale of production, leading to a fall in average costs

Risk bearing economies

Large firms can spread the risk by offering a range of products or services

Finacial economies

Large firms can borrow money from the bank at a lower interest rate

Marketing economies

Large firms can pay for bigger marketing campaigns which reach a larger audience

Technical economies

Large firms can buy the best machines and expertise which increases output

Managerial economies

Large firms can afford to employ specialist managers

Purchasing economies

Large firms can bulk buy their raw materials

Economies of increased dimensions

Doubling the dimensions of a shipping containers to increase capacity and reduce costs of transportation

Research and development economies

Large firms can afford their own R&D departments, helping them stay ahead of competition

Labour market

Where workers sell their labout and employers buy their labour

Supply of labour

The total number of people who are willing and eligible to supply their labour, including the unemployed

Gross pay

The amount of money that an employee earns before any deductions are made

Deductions

Money taken out of a persons pay bracket e.g. income tax/national insurance/pension contribution

Income tax

A tax levied directly on personal income, i.e. a tax on a person's wages.

National insurance

A contribution paid by workers and their employers, towards the cost of state benefits

Net pay

The amount of money that an employee is left with after deductions are made from the gross income

Pension

A fixed amount paid at regular intervals to a person (usually retired), or their surviving dependants.

Money

Anything that is generally accepted as a means of payment for a good or service

Medium of exchange

Anything that sets the standards of goods and services acceptable to all parties involved in a transaction

Financial sector

Consists of financial organisations and their products, and involves the flow of capital

Investment

The purchase of capital goods that are used to produce future goods and services

Rate of interest (interest rate)

The cost of borrowing money and the reward for saving money

Building society

A mutual financial institution that is owned by its members. Its primary objectives are to receive deposits from its members and to lend money for members to purchase property

Mortgage

An agreement with a financial institution to borrow money to purchase a property

Insurance company

Financial institution that guarantees compensation for specified loss, damage, illness or death in return for an agreed premium