The market system Economics

Goods

Things that are produced in order to be sold

Finite

Having an end or a limit

Needs

Basic requirements for human survival

Wants

People’s desires for goods and services

Infinite

Without limits

Basic economic problem

Allocation of a nations scarce resources between competing uses that represent infinite wants

Scarce resources

Amount of resources available when supply is limited

Distribution

Act of sharing things among a large group of people a planned way

Choices

Deciding between alternative uses of scarce resources

Sacrifice

Something valuable that you decide not to have in order to get something that is more important

Opportunity cost

Cost of the next best alternative given up (when making a choice)

Expenditure

Spending by a government, usually a national government

Eliminate

To get rid of something unnecessary or unwanted

Capital goods

Those purchased by firms and used to produce other goods such as factories machinery, tools and equipment

Consumer goods

Those purchased by households such as food, confectionary, cars, tablets and furnitures

PPC / production possibility curve

A line that shows the different combinations of two goods an economy can produce if all resources are used up

Economic growth

Increase in the level of output by a nation

Proportion

Part of a number or an amount, considered in relation to the whole

Vocational

Training that teaches you the skills you need to do a particular job

Agricultural

Practice or science of farming

Variables

Something that affects a situation in a way that means you cannot be sure what will happen

Assumption

Things that you think are true although you have no definite proof

Irrational

Not based on a clear thought or reason

Rational

Based on clear thought or reason

Maximise

To increase something such as profit, satisfaction or income as much as possible

Revenue

Money that a business receives over a period of time, especially from selling goods or services

Allocate

To decide officially that a particular amount of money, time, etc. should be used for a particular purpose

Enterprises

Companies , organizations or businesses

Commission

Amount of money paid to someone according to the value of goods, shares or bonds they have sold

Delegate

To give part of your power or work to someone else, usually someone in a lower position than you

Humanitarian

Concerned with improving bad living conditions and preventing unfair treatment of people

Retailer

Business that sells goods to members of the public rather than to shops

Administration

Activities involved with managing and organizing the work of a company or organization

Demand curve

A line drawn on a graph that shows how much of a good will be bought at different prices

Demand schedule

Table of quantity demanded of a good at different price levels- can be used to calculate the expected quantity demanded

Effective demand

The amount of a good people are willing to buy at given prices over a given period of time supported by the ability to pay

Inverse relationship

(Between price and quantity demanded) when price goes up, the quantity demanded falls and when price goes down the quantity demanded rises

Shift in the demand curve

Movement to the left or right of the entire demand curve when there is a change in any factor affecting demand except price

Disposable income

Income that is available to someone over a period of time to spend; it includes state benefits but excludes direct taxes

(When there’s spare income to spend on whatever the person wants)

Inferior goods

Goods for which demand will fall if income rises or rise if income falls

Normal goods

Goods for which demand will increase if income increases or fall if income falls

Substitute goods

Goods bought as an alternative to another but perform the same function

Complementary goods

Goods purchased together because they are consumed together

Demography

Study of human populations and the way in which they change

Infrastructure

Basic systems and structures that a country needs to make economic activity possible, for example, transport, communication and power supples

Supply

Amount that producers are willing to offer for sale at different prices in a given period of time

Supply curve

Line drawn on a graph which shows how much of a good sellers are willing to supply at different prices

Per annum (p.a)

For or in each year

Proportionate relationship

(Between price and the quantity supplied) when the price goes up, the quantity supplied also goes up and when the price goes down the quantity supplied goes down

Shift in supply curve

Movement to the left or right of the entire supply curve when there is any change in the conditions of supply except the price

Volatile

Changing quickly and suddenly, for example a volatile market rises and falls without much warning

Ventures

New business activities or projects that involve taking risks.

Indirect taxes

Taxes levied on spending such as VAT

Productivity

Rate at which goods are produced, and the amount produced in relation to the work, time , and money needed to produce them

Consumption

Amount of goods, services, energy, or natural materials used in a particular period of time

Subsidy

Money that is paid by a government or organization to make prices lower, reduce cost of producing goods or providing a service, usually to encourage production of a certain good.

Yield

Amount of something that is produced, such as crops or oil extracted

Equilibrium price

Price at which supply and demand are equal

Market cleaning price

Price at which the amount supplied in a market matches exactly the amount demanded

Total revenue

Amount of money generated from the sale of goods

Excess demand

Where demand is greater than supply and there are shortages in market

Excess supply

Where supply is greater than demand and there are unsold goods in the market

Price elasticity of demand

The responsiveness of demand to a change in price

Inelastic demand

Change in price results in a proportionately smaller change in the quantity demanded (alternative term:price inelastic)

Elastic demand

The change in price results in a greater change in the quantity demanded (alternative term: price elastic)

Perfectly elastic

Demand where PED = infinity. (An increase in price will result in zero demand)

If the value of PED is equally to infinity the demand is said to be perfectly elastic

Perfectly inelastic

Demand where PED= 0 (a change in price will result in no change in quantity demanded)

If PED is zero the demand is said to be perfectly inelastic

Unitary elasticity

Where PED= -1 (the responsiveness of demand is proportionately equal to change in price )

If the value of PED is exactly-1 demand is said to have unitary elasticity

Price elasticity of supply

Responsiveness of supply to a change in price

Inelastic supply

Change in price results in a proportionately smaller change in the quantity supplied

(Alternative term: price inelastic)

(Proportionately means the number of variety of goods you have in proportions/ amounts)

Perfectly elastic

Supply where PES is infinity which causes supply to be perfectly elastic

(The consumers will supply an infinite about at a given price)

Perfectly inelastic

When PES is 0 which makes the supply perfectly inelastic

(The quantity supplied is fixed and cannot be adjusted whatever the price is)

Unitary elasticity

When the PES is equal to 1 the supply has unitary elasticity

(A change in price will be matched by an identical change in the quantity supplied)

Wholesalers

A person or company that sells goods in large quantities to businesses rather then the general public

Raw materials

Substances used to make a product

Income elasticity of demand

Responsiveness of demand to a change in income

Discretionary expenditure

Non-essential spending or spending that is not automatic

Excise duty

Government tax on certain goods, such as cigarettes, alcoholic drinks and petrol that are sold in the country

Valued-added tax (VAT)

Tax on some goods and services-businesses pay value-added tax on most goods and services they buy and if they are VAT registered, charge value-added tax on the goods and services they sell.

Economy

A system that attempts to solve the basic economic problem

Private sector

Provision (the act of providing something someone needs) of goods and services by businesses that are owned by individuals or groups of individuals

Dividend

Parts of a company’s profit that is divided amount the people with shares in that company

Sue

To make a legal claim against someone especially for an amount of money because you have been harmed in some way

Pubic sector

Government organizations that provide goods and services in the economy

Shareholders

People or organization that own shares in a company

Assets

Things or resources belonging to an individual or a business that has value or the power to earn money

Liabilities

Amount of debt that is owed or must be paid

Stakeholders

Individuals or groups who are considered to be an important part of an organization or of society because they have responsibility within it and receive advantages from it

Monetary

System of money in a particular country or the world as a whole and the way that it is controlled by governments and central banks

Market failure

Where markets lead to inefficiency

Mixed economy

An economy where goods and services are provided by both the private and public sectors

Dominant

More powerful , important or noticeable than other people or things

Merit goods

Goods that are under-provided by the private sector

Public goods

Good that are not likely to be provided by the private sector

Legislation

Law or set of laws

Merger

Occasion when two or more companies or organizations join together to form a larger company

Regulated

Industry that is closely controlled by the government

Free rider

Individual who enjoys the benefit of a good but allows others to pay

Privatization

Act of selling a company or activity controlled by the government to private investors

Monopolies

Situation where a business activity is controlled by only one company or by government and other companies do not compete with it