Unit 1 Key Economic Terms

Transactions

Exchange of a good and service for payment between a buyer and a seller

Economy

Any place or region around the globe where production takes place

Income

Reward given to those involved in the production process

Expenditure

Spending of income on goods and services

Production

Process of making a good or service

Scarcity

The limited resources available to satisfy society's unlimited wants and needs

Positive Economics

FACT BASED economic statements, can be verified or tested true/false

Normative Economics

Statements or claims based on OPINIONS or VALUE JUDGEMENTS, cannot be verified or tested

Macroeconomics

The study of the economy as a whole, including the factors that affect it and how they interact. It's concerned with large-scale economic issues, such as unemployment, inflation, and economic growth

Microeconomics

Studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

Wants

Consumptions which adds to one's quality of life

Needs

A good or service necessary for one's survival

Choice

Decision to allocate resources to needs or wants

Natural

Materials or substances occurring in nature which can be exploited for economic gain

Labour

Human physical or mental effort used in creation of goods and services, labour is a primary factor in production

Capital

Man-made items used in the process of production

Entrepreneurship

The skills of individuals who combine our resources to provide goods and services, they take financial risks to create wealth and establish enterprises

Trade off

Trading off current consumption for future consumption means that our living standards will be lower today and higher in the future. This type of trade off will typically involve saving more of our present-day income for the future.

Opportunity Cost

The value that could have been derived if the next best alternative was chosen. The cost of forgoing or giving up the opportunity to use the same resources a different way.

Cost benefit analysis

A systematic approach to comparing expected costs and benefits of a project or decision. Efficient resource allocation and minimisation of opportunity costs

Allocative Efficiency

When the resources are distributed in such a way that maximizes living standards and well-being. It's about producing the combination of goods and services that people most desire, given their preferences.

Technical Efficiency

when a nation's resources are producing the maximum amount possible and at the lowest cost, maximising benefits

Building block 1

Ownership of resources

Building Block 2

Economic desicion making

Building Block 3

How prices are determined