IGCSE Economics: Unit 1; The basic economic problem

Capital

man-made goods/materials that are used for the production of other items. Not consumed in their own right. their payment is interest.

Consumption

Using up goods/services

Consumer Goods

goods that are wanted because they provide satisfaction to their owner.

Demerit Goods

goods that are perceived to have a negative impact/effect on society/individuals.

Enterprise

risk taking & decision making in business

Factors of Production

land, labour, capital, enterprise.

Fixed Capital

capital goods that do not need replacing in the short term (machinery, tools, buildings).

Free Goods

goods that require no resources to make (wind, sunshine).

Goods

items produced by the factors of production (usually for economic gain).

Labour

the human effort (mental & physical) required to produce something.

Land

the land we use/build on & resources that are contained in the land and water.

Markets

Place where goods & services are exchanged

Merit Goods

goods that are perceived to provide positive externalities (beneficial to society)

Needs

requirements for continued existence (food, clean water, shelter)

Opportunity Cost

the cost of the next best alternative

Production Possibility Curve

a curve that represents possible output if the factors of production are used efficiently.

Public Goods

good provided by the government (paid for through taxes) that everybody benefits from (street lighting).

Resources

items that are needed/ useful for consumption or the production of other items

Scarcity

limited availability of resources (ones that will run out eventually), not enough to satisfy all the wants

Services

something that fulfils a need, often not a physical object (banking, teachers, policemen).

Wants

the desires that people have that are not necessary for their existence/ luxuries.

Working Capital

capital products that are used up in the production process (raw materials).