lila economics

Money flow

The flow of income and spending between households and firms

Real flow

The flow of goods and services and resources between households and firms

Two-sector economy

Consists of households and firms

Factors of production

Labour, Land, Capital, Entrepreneurial ability

Interdependent

The relationship between money flow and real flow, households and firms are interdependent for the circular flow

Scarcity

Limited amount of a given resource

Opportunity Cost

What is given up when making a choice

Socioeconomic Goals

Objectives achieved through government spending and resource allocation

Limited liability

Owner's personal assets are protected from being taken to pay off a company's debts

Capital

The money that a business generates

Private Company

Solely owned by friends/relatives of an entrepreneur, doesn't sell shares to the public

Public Company

Allows the public to buy shares and become partial owners

NZX

New Zealand stock exchange where NZ residents can buy shares

Debt Finance

Obtaining finances by borrowing money and paying it back with interest

Equity Finance

Obtaining finances by selling shares to investors

Internal sources of finance

Obtained from inside the company, e.g., owner investment, retained profits

External sources of finance

Obtained from outside the company, e.g., investors, bank loans

Line of credit

A unit of borrowing available for use at any time

Shares

Parts of a company that can be sold, representing ownership

Shareholder

Person owning shares in a company

Separate legal entity

Company is distinct from owners, can enter contracts, get sued, and own property.