y10 economics

economics

how choices are made by individuals, businesses, governments and other organisations to determine the allocation of scarce resources

scarcity (the basic economic problem)

where the unlimited human wants exceeds the world’s limited supply of resources

opportunity cost

a good or service given up in order to purchase or produce another good or service due to scarcity

needs

things that are necessary for survival

examples of needs

food, water, shelter, clothing

wants

material things or desires

complementary goods

goods or services that are used with other goods or services

examples of complementary goods

petrol with a car, ink with a printer

factors that influence wants

age, income, trends

goods

tangible items

services

intangible experiences

the 3 economic questions

what/how/for whom to produce

consumer

an individual, household or business that buys and uses goods and services to satisfy their needs and wants

producer

an individual or business that creates, supplies or sells goods and services in the economy

cost of production

the amount of resources used in the production process

sustainability

the process of using resources at the rate which they are naturally replaced

primary sector

represents companies that extract natural resources

examples of primary sector

farming, forestry, mining

secondary sector

represents companies that process resources into finished or semi-finished goods

examples of secondary sector

oil refining, recycling factories

tertiary sector

represents companies that provide a backup service

examples of tertiary sector

marketing, retail, transport

land

raw or natural resources that occur naturally from the environment

capital

any man-made tools and machinery used in the production process

labour

the physical and mental effort and the human skills used in the production process

enterprise

an individual who uses entrepreneurship to make an economic profit by combining all other factors of production

capital intensive production

when the production process uses more machines than workers

advantages of capital intensive production

• can work 24/7

• more productive

• can do more dangerous activities

disadvantages to capital intensive production

• high initial cost

• high maintenance

• causes unemployment

labour intensive production

when the production process uses more workers than machines

advantages to labour intensive production

• workers can learn new skills

• labour can be used for different tasks

• physical touch

disadvantages to labour intensive production

• wages too high

• can only work for so long

• illness

consumer demand

the willingness and ability of the buyer to pay for a good

producer supply

the willingness and ability of a producer to supply a good

price

how much something costs

marketplace

where buyers and sellers meet to exchange goods or services

price mechanism

the system whereby producer supply and consumer demand interact in the marketplace to set prices for goods and services

demand

the behaviour of buyers towards certain goods and services

law of demand

the lower/higher the price, the higher/lower the demand

supply

the quantity of a good or service that will be provided by a producer at a particular price

law of supply

the lower/higher the price, the lower/higher the supply

equilibrium price

the price where consumer demand equals the supply of goods; Qd = Qs

what happens to the supply or demand curve when there is a decrease in quantity demanded?

the curve shifts towards the left

what happens to the supply or demand curve when there is an increase in quantity demanded?

the curve shifts towards the right

factors that cause a shift in the demand curve (other than price)

• price and availability of substitute products

• price and availability of complementary products

• disposable income

factors that cause a shift in the supply curve (other than price)

• cost of resources

• technological change

• number of suppliers

shortage

when Qd exceeds Qs

what happens/can be inferred when there is a shortage?

• the price is below equilibrium level

• the market price is too low

surplus

when Qs exceeds Qd

what can be said about the price/can be inferred when there is a surplus?

• the price is above equilibrium level

• the market price is too high