OCR GCSE economics keywords

Needs

Something essential to survival - food, water, warmth, clothing and shelter

Wants

Something you would like to have, but is not essential to survival

Resources

Something used to produce output

Productivity

Output per worker per period of time

Factors of production

The resources we have available to produce goods and services - Capital, Enterprise, Land and Labour (Production Cell)

Primary Sector

Where the extraction of raw materials takes place - Mining, farming, fishing, oil extraction, forestry, quarrying

Secondary Sector

Where raw materials are manufactured into goods - Car manufacturing, furniture manufacturing, manufacture of electronic goods, for example computers, mobile phones

Tertiary Sector

Where services are applied - Banking, tourism, education, public transport, entertainment, health services, insurance, advertising

Opportunity Cost

The next best alternative foregone when making a choice - what we give up when we make a choice

Market

Where buyers and sellers meet to exchange goods and services. This does not have to mean a face-to-face meeting

Market Economy

Where all resources are allocated by private individuals and groups

Planned Economy

Where all resources are allocated by the government

Mixed Economy

Where some resources are allocated by the government, and other resources are allocated by private individuals and groups

Public Sector

The government sector of the economy, where organisations are owned and run by the government

Private Sector

The sector of the economy where firms are owned and run by private individuals and groups - their main aim is profit maximisation

Surplus

when more is produced than is required. It can be exchanged for money or other goods and services

Competitive market

a market situation in which there are a large number of buyers (demand) and sellers (supply)

Monopoly

A situation where there is only one firm selling in a market. For example, before 2006 Royal Mail was one, being the only firm to provide the service of letter delivery

Monopoly Power

When a firm has more than 25% of the market share. Tesco has a legal one in the supermarket industry, it holds approximately 31% of the market share. This means that 31% of all supermarket sales happen at Tesco.

Demand

the quantity of buyers are willing and able to buy at a given price in a given period of time

Effective Demand

Solid, or real Demand

Contraction of demand

the fall in the quantity demanded due to a rise in price

Extension of demand

the increase in quantity demanded due to a fall in price

Inferior Goods

goods for which the demand falls when income rises. An example may be bus journeys. As people's income rise, they can afford to buy their own vehicles and the demand for bus journeys falls

Perfectly Inelastic Demand

The quantity demanded remains the same although the price changes, i.e. demand in completely unresponsive to a change in price, zero

Inelastic demand

The quantity demanded changes at a lesser rate than price, less than 1

Unit Elastic Demand

The quantity demanded changes at the same rate as price, 1

Elastic demand

The quantity demanded changes at a greater rate than price, greater than 1

Perfectly elastic demand

Any quantity is demanded at a given price, Infinity

Total revenue

The amount of money a firm receives when selling its product. (At this stage we do not consider total costs.) equal to price times quantity sold

Supply

the quantity a producer is willing and able to produce at a given price in a given period

Perfectly Inelastic Supply

The quantity supplied remains the same as the price changes, i.e. supply is completely unresponsive to a change in price, zero

Inelastic Supply

The quantity supplied changes at a lesser rate than price, less than one

Unit elastic Supply

The quantity supplied changes at the same rate as the price, 1

Elastic Supply

The quantity supplied changes at a greater rate than price greater than one

Perfectly elastic supply

Any quantity is supplied at a given price

Equilibrium

the point where demand and supply meet

Specific Tax

a tax placed on a good or service which is a specific amount of money per unit bought, for example 2 pound tax on each bottle of wine

Ad Valorem tax

a tax placed on a good or service which is a percentage of the price

Output

The number of goods and services produced by a firm

Fixed costs

costs that do not vary with output (e.g. rent)

Variable Costs

costs that very directly with output (e.g. raw materials)

Total Revenue

the amount a firm receives from selling its product

Production

The process of combining scarce resources to make an output

Productivity

output per worker per period of time

Merger

agreed coming together of two firms

Takeover

when one firm seeks to take control of another (this can be either friendly or hostile).

Integration

this occurs when two firms come together through either a merger or a takeover

Internal economies of scale

when one firm grows in size (increases output) and so benefits from lower average costs.

External economies of scale

when a whole industry grows in size, so a firm within that industry benefits from lower average costs

National minimum wage

a pay floor introduced by the government, which sets a wage level below which producers cannot legally go

Economic Growth

growth in output of the economy over time - a growth of real GDP over time

Gross domestic product (GDP)

the total value of goods and services produced in the country in a year

GDP per capita

GDP divided by the total population, therefore GDP per head.

Full employment

when all those able and willing to work are in paid employment at the current wage rate

Unemployment

when workers who are able and willing to work are unable to find employment (at current wage rates)

Claimant Count

measures unemployment according to the number of people claiming unemployment-related benefits ( such as Jobseeker's Allowance)

Labour force survey

a survey of a sample of households, counting people as unemployed if they are actively seeking work but do not have a job (in the week of the survey).

Inflation

A sustained rise in the general price level over time

Price stability

the general level of prices is kept constant or grows at an acceptably low rate over time.

Rate of inflation

the rate at which the general price level rises over time.

Consumer Price Index

the official measure of the rate of inflation

Monetary inflation

inflation caused by growth in the economy's money supply.

Demand-pull inflation

inflation caused by excess demand in an economy

Cost-push Inflation

inflation caused by a rise in costs in the economy

Hyperinflation

a rate of inflation so high that the value of money becomes close to worthless.

Tax

a compulsory payment to the government

Direct tax

A tax on income or wealth

Indirect Tax

a tax on spending, often defined as a tax on goods and services.

External Cost

The negative impact of an economic transaction on a party who is not directly involved in the transaction. For Example, manufacturing that causes air pollution has costs for the whole population. (a negative impact is an external cost or negative externality; a positive externality.)

Demerit Good

A good or service whose consumption is considered unhealthy or undesirable due to its bad effects on the consumers. It is over-consumed if left to market forces. Examples include tobacco, alcohol, recreational drugs, gambling and junk food.

Demerit goods give rise to negative externalities; merit goods give rise to positive externalities.

Distribution of Income

how incomes are shared out among the people of the country

Redistribution of income

a policy to reduce the inequalities of income so that incomes are distributed more evenly

Inequalities of income

incomes are distributed unevenly so some people have a much higher income than others

Transfer Payments

Benefits to citizens which are paid out of tax revenue

Regressive tax

a tax that takes a greater proportion of income from lower incomes, or takes a smaller percentage of a higher income

Proportional Tax

Tax that takes the same proportion of income from all income levels

Progressive Tax

Tax that takes a greater proportion of income from higher incomes, or takes a smaller percentage of lower income

Market Failure

when the market (through demand and supply) fails to allocate resources in the best interests of society as a whole

Fiscal Policy

a policy that uses taxation and government spending to try to achieve the objectives of the government

Balanced Budget

government spending is equal to tax revenue

Budget Deficit

government spending is greater than tax revenue

Budget Surplus

tax revenue is greater than government spending

Multiplier Effect

A process by which an original change in incomes in an economy leads to a total change in incomes which is a multiple of the original change

Money

anything that is generally acceptable as a medium of exchange

Banks and building Societies

Financial institutions that accept deposits and make loans

Interest Rate

the reward for saving and the cost of borrowing

Monetary Policy

a policy aimed at affecting the total supply of money in an economy

Interest rate policy

the use of interest rates to try to achieve the government's economic objectives

Bank Rate

The Interest rate set by the Bank of England, which affects all interest rates in the economy (also called the base rate).

Supply-side policies

policies that increase the ability of the economy to supply more goods and services

Globalisation

an expansion of world trade in goods and services leading to greater international Independence

Multinational company

a company that has operations all over the world

Specialisation

being better than another country at providing a good or service, in terms of the quantity of output and lower cost

Absolute advantage

when a country is able to provide a good or service using fewer resources and at a lower cost then another country

International trade

the exchange of goods and services across international boundaries

Free trade

an absence of tariffs, quotas and regulations designed to reduce or prevent trade among nations

Protection

where an action is taken that reduces international trade

Tariff

a tax placed on imports to increase the price and reduce the quantity demanded