Nat 5 Economics

Scarcity

Scarcity is the basic economic problem. It occurs because we have unlimited wants for goods and services, due to greed. However we have limited resources. Resources are the factors of production.

Opportunity Cost

A sacrifice made for the next best alternative.

Economic Efficiency

Producing goods and services that people most want, at a minimal cost.

Demand

Being willing and able to buy a good or service at a particular price.

Total Utililty

Total satisfaction from consuming all units of a good or service.

Marginal Utility

The extra satisfaction gained from consuming one more unit of a good or service.

Diminishing Marginal Utility

A decline in the extra satisfaction we get from consuming extra units of a good or service.

Supply

Being willing and able to provide a good or service at a particular price.

Market

It's wear buyers and sellers come together to agree a price and exchange.

Disposable Income

Money left over after deductions such as income tax.

Exchange Rate

The price of one currency in terms of another.

Cyclical Unemployment

When a firm has a low economic output and varies with the business cycle they let people go.

Frictional Unemployment

When people move jobs.

Technological Unemployment

When there are changes in the work due to technological advances and so technology is chosen over people.

Structural Unemployment

When the company moves abroad.

Direct Taxation

Taxes which are taken from individuals and firms and payed straight to the government.

Indirect Taxation

Taxes payed through an intermediary to the tax authorities.

Progressive Taxation

When the proportion of taxation rises as income increases.

Regressive Taxation

When the proportion of taxation falls as income increases.

Trade Deficit

Value of imports greater than the value of exports.

Trade Surplus

Value of exports greater than the value of imports.

Real Growth

Takes into account inflation.

Recession

2 consecutive quarters of negative economic growth.

Demand Pull

When demand in the economy increases and firms reach capacity the prices are bid up.

Cost Push

When the price of the input increases, firms will increase prices to maintain a profit margin.

Monetary Inflation

When the money supply of the economy grows. Consumers spend more money, this will drive up demand and hence the prices.

Unemployment

Able, available and willing to work but cannot obtain a job.

Rate of Unemployment

The proportion of the labour force not working.

Level of Unemployment

Number of people not employed.

Claimant Count

Based on administrative records of people claiming unemployment benefits.

Labour Force Survey

A survey sent to around 150,000 people, asking about their personal circumstances and their position in the Labour Market.

Seasonal Unemployment

When a job can only be obtained during certain seasons.

Discretionary Income

Money left over after deducting all expenses from income.

Fixed Cost

A cost which does not change with and increase or decrease in output.

Variable Cost

A cost which does change with an increase or decrease in output.

Long Run

All factors of production are variable. This means all costs are variable.

Short Run

A period of time where at least one factor of production is fixed.

Revenue

Money made from selling a good or service.

National Income

Value of goods and services produced in an economy in a year.

Economic Growth

Increase in the production capacity of the economy.

Nominal Growth

Money value of output.

Free Market

Based on consumers demand. Using firms resources so that we can get maximum output for minimum input at the lowest cost. For those who can afford it.

Command Economy

Government decide what is produced. Government give produces quotas. Everyone gets to buy.

Income Effect

The price of a good rises. Consumers real income falls. Fall in purchasing power. Buy less of a good.

Substitution Effect

A price of a good rises. Consumers look to switch to similar products. Buy less of a good.

Demand Factors P

Population

Demand Factors A

Advertising

Demand Factors S

Substitution

Demand Factors I

Income

Demand Factors F

Fashion & Trends

Demand Factors IR

Interest Rate

Demand Factors C

Complementary Goods

Supply Factors P

Productivity

Supply Factors I

Indirect Tax

Supply Factors N

Number of Firms

Supply Factors T

Technology

Supply Factors S

Subsidies

Supply Factors W

Weather

Supply Factors C

Cost of Production

Price Stability Aim

Low Inflation

Unemployment Aim

Low level of unemployment and reduce structural and frictional

Balance of Payments Balance Aim

Value of exports equal to the value of imports

Economic Growth Aim

Steady Growth

Reduce Inequality Aim

Reduce the gap between Rich and Poor

Tariffs

Tax on Imports

Qoutas

Limit on volume

Embargoes

Ban commodities

Soft Loans

Loan at a beneficial rate

Bureaucracy

Red tape