Humanities exam revision

Economy

Large set of interrelated production, consumption, and exchange activities that aid in determining how scarce resources are allocated in a country or for a period of time.

Economics

Study of how economies and societies best satisfy their population’s needs and wants through the allocation of scarce resources.

Microeconomics

study of individuals and business decisions

Macroeconomics

study of decisions made by countries or governments

Relative Scarcity

problem exists because individuals/groups cannot satisfy all their wants/needs using their limited resources

The theory of consumerism states

• An increasing consumption of goods is economically desirable

• Consumers have a natural and increasing inclination towards the purchase of goods/services

Opportunity cost

cost of second-best choice or alternative that is given up in the consumption/production process

Psychic Profit

the non-monetary/non-material satisfactions that people are driven by

Factors that influence demand

• Consumers

• Producers (because they must buy resources in order to produce goods/services)

Law of Demand

When price increases, quantity demanded decreases

Economic resources that influence ability supply

• Natural Land

• Labour

• Capital

• Management/Entrepreneurship

Law of Supply

When price increases, quantity of supplied will increase

Equilibrium

the state in which market supply and demand balance each other, and prices become stable

Subsidy

the financial benefit provided by the government to individuals or businesses to promote a public objective/support certain economic activities

Entrepreneur

Someone who is willing to seize opportunities to start/operate a business and is prepared to take risks for profit.

Characteristics of an entrepreneur

• Highly motivated

• Critical/creative thinkers

• Financially and digitally literate

• Risk takers

• Confident decision makers

• Strong communicators/planners/leaders

Stakeholders

umbrella term for the individuals and groups that have one or more vested interests in a business’ activities/performance

Internal stakeholders

found in a business’ internal environment, such as owners or employees

External stakeholders

found in a business’ external environment, such as customers and suppliers.

Competitive advantage

something that sets a business apart from its competition and thus makes consumers want to choose that business.

ways to create competitive advantage

• Innovations

• Increased productivity

• Increase in research/development

• Invest in advertising/marketing

• Fill ‘gap in the market’

• Offer goods same quality at less cost

Corporate social responsibility

a business going above and beyond legal requirements in order to improve the social, environmental and economic outcomes of stakeholders

Globalisation

increasing interconnectedness of people, states and countries through the exchange of money, ideas, and culture

Inflation

average rise in the price of goods/services over a period of time

Is inflation bad?

Inflation is not completely the worst as it contributes to economic growth, it is bad when inflation becomes too big.

Factors for production

• land

• labour

• capital

• enterprise

Communism

Communism is a political and economic system that seeks to create a classless society in which the major means of production, such as mines and factories, are owned and controlled by the public. There is no government or private property or currency, and the wealth is divided among citizens equally or according to individual need.