Economics key terms

Consumers

A person or organisation that directly uses a good or service

Producers

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

Land

The natural resources in an economy such as farmland or mineral deposits

Labour

The workforce of an economy in terms of both the physical and mental effort involved in production

Capital

Relates to human-made aids of production

Enterprise

Takes a risk in organising the other three factors of production. The individual who takes the risk is known as an entrepreneur

Good

A tangible product- a product that can be seen or touched

Service

An intangible product, cannot be seen or touched

Production

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

Scarce resources

When there is an insufficient amount of something to satisfy all wants

Unlimited wants

The infinite desire for goods or services consumers would like to have

Economic problem

How to best use scarce resources to satisfy the unlimited wants of people

Opportunity cost

The next best alternative given up when making a decision

Economic choice

An option for the use of selected scarce resources

Economic sustainability

The best use of resources in order to create growth or development for a country, firm or individual both now and into the future

Social sustainability

The impact of development or growth that promotes and improvement in quality of life for all, now and in the future

Environmental sustainability

The impact of development or growth where the effect on the natural world is small and possible to manage, both 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

Product market

Market in which final goods or services are offered to consumers, businesses and the public sector

Factor market

Market in which the services of the factors of production are bought and sold

Specialisation

The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing

Exchange

The giving up of something that the individual or firm has, in return for something they wish to have but do not possess

Division of labour

Where workers specialise in, or concentrate on one area of the production process

Feature of an efficient market

The prices of products reflect the worth of resources used in their production

Demand

The willingness and ability to purchase a good or service at a given price in a given time period

Derived demand

The demand for a good or service that arises from the demand for another related good or service

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 in a given time period found by adding together all individual demands

Shift of the demand curve

A complete movement of the existing demand curve either outward or inward

Movement along the demand curve

When the price changes, leading to a movement up or down the existing demand curve

When do shifts in the demand curve occur

When the quantity demanded of a good changes even though the price remains the same

What causes shifts in the demand curve (list)

Income, marketing, trends, substitutes, population

What are the consequences of shifts in the demand curve

Producers may go out of business and demand for substitutes may fall

What happens to price and quantity when there is a shift in the demand curve

It will lead the price and quantity to move in the same direction

What causes movements along the demand curve

A change in price caused by a shift in the supply curve

What happens to price and quantity caused by a movement along the demand curve

Price and quantity move in opposite directions

Tax

A compulsory payment to the government

Subsidy

An amount of money the government gives directly to firms to encourage production and consumption

Price elasticity of demand

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

Inelastic demand

When the percentage change in quantity demanded is greater than the percentage change in price

Inelastic demand values

Between 0 and -1

Elastic demand values

< -1

Unitary elasticity value

-1

Supply

The ability and willingness of firms to provide goods and services at each price in a given time period

Law of supply

For most products the quantity supplied varies directly with its price

Individual supply

The supply of a good or service by an individual producer

Market supply

The total supply of a good or service as a result of adding together all the individual producers supplies

Shift of the supply curve

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

Movement along the supply curve

When the price changes, leading to a movement up (extension) or down (contraction) on the existing supply curve

Price elasticity of supply

The responsiveness of quantity supplied to changes in price of the product

Inelastic supply

When the percentage change in quantity supplied is less than the percentage change in price

Elastic supply

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

Unitary supply

When the percentage change in quantity is the same as the percentage change in price