Economics definitions P1 OCR GCSE

consumer

a person or organisation that directly uses a good or service

producer

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

government

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

good

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

service

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

production

the total output of goods and services produced by a firm or industry in a time period

factors of production

the resources in an economy that can be used to make goods and services e.g. land, labour, capital and enterprise

labour

the factor of production that is concerned with the workforce of an economy in terms of both the physical and mental effort in production

land

the factor of production that is concerned with the natural resources of an economy, such as farmland and mineral deposits

capital

the factor of production that relates to the human-made aids to production

enterprise

the factor of production that takes a risk in organising the other three factors of production

entrepreneur

the individual who takes the risk in organising the three factors of production: land, labour and capital

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

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 forgone when making an economic decision

economic choice

an option for the use of selected scarce resources

economic sustainability

the best use of resources in order to create responsible development or growth, 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

environmental sustainability

the impact of development or growth where the effect on the environment is small and possible to manage, now and into the future

market

a way of bringing together buyers 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 involve 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 or services are offered to consumers, businesses 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 quantity of a good or service a consumer is willing and able to buy at a given price

law of demand

for most products the quantity demanded varies inversely with its price

individual demand

the demand for a good or service by an individual consumer

market demand

the total demand 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 or down the existing demand curve

shift of the demand curve

a complete movement of the existing demand curve either outwards (to the right) or inward (to the left)

subsidy

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 demanded is greater than the percentage change in price

inelastic demand

when the percentage change in quantity demanded is less than the percentage change in price

price elasticity of demand (PED)

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

law of supply

for the most products the quantity supplied varies directly with its price

supply

the quantity a firm is willing and able to provide at a given price

individual supply

the supply of 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 movement of the existing supply curve either outward (to the right) or inward (to the left)

elastic supply

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

inelastic supply

when the percentage change in 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 which 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 with 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 a producer has left after all the cost have been paid i.e. when total revenue is greater than total cost

productivity

one measure of the degree of efficiency in the use of factors of production in the production process, measured in terms of output per unit of input

average cost

the cost of producing a unit

total cost

all the costs of the firm added together

total revenue

the total income of a firm from the sale of its goods or services

average revenue

the revenue per unit sold

loss

when a firm’s revenue is less than its costs

economies of scale

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

labour market

where workers sell their labour and employers buy the labour: it consists of households’ supply of labour and firms’ demand of 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

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

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