Economics OCR GCSE paper 1 key terms

Government

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

Consumer

a person or organisation that directly uses a good or service

Producer

an individual, company or country that makes, grows or supplies goods and/or services

Interdependence

each economic group responds to the actions of others

Good

a tangible product

Service

an intangible product

the factors of production

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

production

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

land

natural resources, such as farmland and mineral deposits

labour

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

Capital

the human made aids to production

Enterprise

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

Scarce resources

Insufficient amount of something to satisfy all wants

Unlimited wants

The infinite desire for goods and services that consumers would like to have

Economic problem

How best to use scarce resources in order to satisfy unlimited wants of people

Opportunity cost

The next best alternative given up when making a choice

Economic choice

An option for the use of scarce resources

economic sustainability

The best use of scarce resources to promote development or growth for a country, firm or individual, now and in the future

Social sustainability

The impact of development that promotes an increase in the quality of life for all, now and in the future

Environmental sustainability

When the impact of growth or development on the natural world is small and manageable now and in the future

Primary sector

Direct use of natural resources, such as extracting basic materials and goods from the land or sea

secondary sector

manufacturing or construction activities

tertiary sector

all activities in the economy that involve a service, such as transport.

Market

Any way of bringing together buyers and sellers to buy or sell goods and services

Factor market

Where the services of the factors of production are sold

Product market

Where final goods and services are offered to consumers, businesses and the public sector

Specialisation

The process whereby individuals, firms, regions or countries focus on producing what they are best at

Division of labour

Where workers concentrate on one area of the production process

Exchange

Giving up of something you have in return for something you do not have, but wish to have

Goods

physical products

Services

intangibles

Demand

the willingness and ability to purchase a good or service at a given price over a given time period

Law of demand

for most products, the quantity demanded varies inversely with its price

Individual demand

the demand for a good/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 outward (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

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

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

Supply

the willingness and ability of firms to provide a good or service at a given price over 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/service by an individual producer

Market supply

the total supply of a good or service found by adding together all individual supplies

Movement along the supply curve

when the price changes, leading to a movement up or down the existing supply curve

Shift of the supply curve

a 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

Unitary elastic supply

when the percentage change in quantity supplied is the same as the percentage change in price

price elasticity of supply

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

Price

the sum of money paid by a consumer to a producer for a good or service. It is determined by the interaction of supply and demand

Efficiency

the optimal production and distribution of scarce resources

Allocation of resources

how scarce resources are distributed among producers and how scarce goods are allocated among consumers

Equilibrium price and quantity

where the quantity supplied exactly matches the quantity demanded

Determination of price

the interaction of the free market forces of demand and supply to establish the general level of price for a good/service

Market forces

factors that determine price levels of the availability of goods and services in an economy without government intervention

Competition

Where different firms in a market are trying to sell similar products to consumers

Market economy

Where the forces of demand and supply determine the allocation of resources

Monopoly

A sole seller or producer in a market

Oligopoly

A small number of firms control the large majority of market share

Competitive market

A market in which there are a large number of (usually) small firms where price and quantity are set by market forces

Production

Total output of goods or services produced by a firm or industry in a period of time

Productivity

One measure of the degree of efficiency in the use of factors of production in the production process. It is measured as output per unit of input

Total cost (TC)

All costs added together (OR TFC+TVC)

Average cost (AC):

Total costs divided by total output. Unit cost of production

Total revenue

Total income from the sale of goods and services

Average revenue

Total revenue divided by total output. Revenue per unit sold

Profit

Total revenue minus total costs, including opportunity costs

Loss

When total revenue is less than total cost

Economies of scale

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

Labour market

Workers sell their labour and firms buy their labour

Determination of wages

Interaction of supply of labour and demand for labour

Supply of labour

The amount of workers willing and able to supply their labour (including the unemployed)

Demand for labour

Is derived demand- demand for labour due to demand for the good or service the labour produces

Gross pay

Earnings (ie wages) before any deductions are taken

Net pay

Earnings after all deductions have been taken

Income tax

A direct tax levied on income

National insurance contributions

Contributions paid by employee and employer to pay towards state benefits

Pension contributions

Contributions paid by employee and employer towards future pension payments

Money

Anything that is generally accepted as a means of payment for goods and services

Medium of exchange

Anything that sets the standard of value of exchange of goods and services that is acceptable to all parties in a transaction

Financial sector

firms that provide financial services

Interest rates

The cost for borrowing and the reward for saving

Investment

The purchase of capital goods that are used to produce future goods and services

Central bank

The institution responsible for issuing a country's banknotes, acting as a lender of last resort for other banks, and implementing monetary policy

Commercial (retail) bank

an institution that takes deposits from customers individuals and firms and turn them into assets for the bank

Building societies

A mutual financial institution owned by its members. Its primary objectives are to receive deposits from its members and to lend money to members to purchase property

Insurance company

A financial institution that guarantees compensation for specified loss, damage, illness or death in return for a premium

Mortgage

An agreement with a financial institution to borrow money to purchase a property

Saving

The part of a person's disposable income which is not spent on consumption

Borrowing

To receive money from another party with the agreement that the money will be repaid