Unit 1.1 Introduction to Economics

Government

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

Consumer

A person, group or organisation that directly buys and uses a good or service

Producer

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

Key decisions producers have to make

Impact of the government on a country

Tax - e.g. rate of income tax and VAT to charge (to gain income)

Spending - e.g. how much spending to allocate to schools, NHS(healthcare)

Laws - e.g. passing Acts to protect consumers, workers, the environment

Redistributing income - e.g. taxing high income groups more and providing benefits to low income groups

Trade - e.g. developing free trade contracts with the rest of the world following Brexit vote

Interdependence

Where one or more economic groups respond to the actions of another economic group

Example of Interdependence

• Due to an increased population there is more demand for housing from

consumers

• This has increased house prices

• This has encouraged more house builders (eg Bovis) to increase the number of

houses they are building (increase supply)

• This has helped the government as more people are in work (eg brick layers,

plasterers) and tax revenue will rise

Good

A tangible product that can be seen or touched, e.g. a mobile phone, car, washing machine, tablet

Service

An intangible product that cannot be seen or touched, a task performed for a a payment, e.g. financial advice, haircut, train journey, holiday, meals out

Factors of production

The resources in an economy that can be used to make goods and services

Capital

Enterprise

Land

Labour

Capital

Human-made aids to production

Examples: Infrastructure includes human made capital Tractors that supports the operation of the production Robots process. E.g. roads,rail,airports

Machines

Enterprise

Where the other factors of production are organised to make goods

and services.

Entrepreneurs are the individuals who:

• Organise production

• Bear the risks of the project

Land

All natural resources in an economy.

Land includes:

• Oil

• Cotton

• Honey

Renewable resources are those that

can be replaced over time if they are

not over used eg wood/forests

Non-renewable resources are those

that cannot be replaced once used eg

coal

Labour

All human resources which make up the workforce

Labour depends on:

1.Size of working

population

2.Immigration/

emigration

3.Quality of labour

(skills, training,

qualifications and

health of workers)

Capital Intensive

Uses a large proportion of capital compared to labour to produce products, it involves the use of machines, robots, computer-aided manufacture.

Labour Intensive

Uses a large proportion of labour compared to capital to

produce products.