OCR GCSE Economics MICRO

Define Consumer

A person or organization that directly uses a good or service

Define Good and Service

Good; A tangible product; a product that can be seen or touched

Service; An intangible product; a product that cannot be seen or touched

Define Government

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

Define Producer

A person , company or country that makes, grows or supplies goods and or services ; by bringing together the factors of production

Define Production

The total output of goods and services produced by a firm or industry

Define Capital

The FACTOR OF PRODUCTION that relates to human-made aids to production ; such as tools and machinery

Define 'The basic Economics Problem'

The mismatch between scarce resources and unlimited wants

How to best use limited resources to satisfy the unlimited wants of people

Define Needs and Wants

Needs; Something a consumer has have to survive

Wants; Something a consumer would like to have, but which is not essential for survival

Define Opportunity cost

The NEXT BEST ALTERNATIVE is given up when making an economic decision

Define Social and Environmental sustainability

Social sustainability; The IMPACT OF DEVELOPMENT OR GROWTH that promotes an improvement in quality of life for all, NOW AND INTO THE FUTURE

Environmental sustainability; The IMPACT OF DEVELOPMENT OR GROWTH where the effect on the environment is small and possible to manage, NOW AND INTO THE FUTURE

Define Economic sustainability

The BEST USE OF RESOURCES in order to create RESPONSIBLE DEVELOPMENT AND GROWTH, NOW AND INTO THE FUTURE

Define Market

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

Define Market economy

An economy in which scarce resources are allocated by the market forces of supply and demand

What are the four sectors of the economy?

Primary sector; Extraction of raw materials from the natural world

Secondary sector; Manufacturing of refined materials and goods or Construction

Tertiary sector; Providing Services

Quaternary sector, Research and Development

Define Factor market

The market in which the services of the factors of production are bought and sold

Define Product market

The market in which FINAL goods and services are offered to consumers, businesses and the public sector

Define Specialization

The process by which individuals, firms, regions and whole economies concentrate on producing those products they are best at producing

Define Division of Labour

Where workers specialise in, or concentrate on, one area of the production process

Define Demand

The willingness and ability to purchase a good or service at a given price in a given time period

What are Individual and Market Demand?

Individual Demand is the Demand for a good or service by an individual consumer

Market demand is the Total Demand for a good or service (adding up all Individual Demand)

Define PED (Price Elasticity of Demand)

the responsiveness of the Quantity Demanded to a change in the price of the product

Define Elastic and Inelastic Demand

Elastic Demand; when 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 percentage change in price

Define Supply

The willingness and ability of producers to provide goods and services at a given price at a given time period

What are individual and Market supply?

Individual Supply is the supply of a good or service by an individual producer

Market Supply is the Total Supply of a good or service (adding up all Individual Supply)

Define PES (price Elasticity of Supply)

The responsiveness of Quantity Supplied to a change in the change in price of a product

Define Elastic and Inelastic Supply

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

What is the 'Law of Demand'

Generally as a products price increases the quantity demanded decreases (Varies Inversely)

What is the 'Law of Supply'

Generally as a products price increases the quantity supplied increases (Varies directly)

Describe the basic S and D diagram

X-axis is known as Quantity

Y-axis is known as Price

There is a Positive gradient line known as Supply

There is a Negative gradient line known as Demand

The lines converge at the Equilibrium where Equilibrium

Price and Quantity can be calculated

Excess Demand and Supply can be calculated using the

Equilibrium

the gradient of the Supply and Demand lines can be deduced by their Elasticity

FACTS - Supply and Demand curves can only either Shift (left or right) or Contract and expansion (movement along the curve)

FACTS - Supply and Demand curves can only either Shift (left or right) or Contract and expansion (movement along the curve)

What causes shifts in the Demand Curve?

Income

Marketing/Advertisements

Tastes, Fashion and Trends

Substitutes and Compliments

Population

Government policies

Economic situation

Price expectations

What causes shifts in the Supply Curve?

Costs of Production

Taxes and Subsidies

Technology and Innovation

Climate

Increasing Competition

Government Regulations

Define Price

The sum of money you have to pay for a good or service. It is determined by the interaction of supply and demand

What are the three functions of Price?

Signaling; Prices change to signal where scarce resources are needed

Transmissions of Preferences; Prices send information to suppliers about changing needs

Rationing; Prices help ration scarce resources, scarce resources have higher prices

Define Efficiency

The optimal production and distribution of scarce resources

Define 'Allocation of Resources'

How scarce resources are allocated/distributed among producers and how scarce goods and services and distributed among consumers

Define 'Determination of Price'

The interaction of free market forces of Supply and Demand to establish a general price level for a good or service - where there is no pressure for price change

Define Equilibrium Price

When Quantity supplied = Quantity demanded

FACTS - All markets are either, Competitive markets, Oligopolies or Monopolies

FACTS - All markets are either, Competitive markets, Oligopolies or Monopolies

FACTS - Firms either compete via Price Competition or Non-Price Competition

FACTS - Firms either compete via Price Competition or Non-Price Competition

Why do producers/firms compete?

To enter a market

To survive in a market

To make a profit

Explain the benefits of competition

Innovation

Increased efficiency

Increased productivity

Lower prices

Define Profit

The amount of money left over after all costs have been paid (when Total Revenue is greater than Total Cost

Define Productivity

A measure of the degree of efficiency of the labour market measured in the terms of output per unit of input

What are the costs of Productivity?

Lead to higher unemployment

What are the benefits of Productivity?

Lower average costs (Economies of Scale)

Higher profits

Generates more taxes

Increases GDP/furthers Economic Growth

How can Productivity be increased?

Workers specializing in a part of production (Division of Labour)

Specialization

Investment in to new technology/capital

Improving skills of workers (via training)

Better organization of workers (logistics)

Define 'Economies of Scale'

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

What are all the types of Economies of Scales?

Technological economies; Specialist equipment

Economies of increased dimensions; Efficient use of storage and space (mega tankers)

Purchasing/Bulk-buying economies; Bulk discounts

Division of Labour; Specialization

Financial economies; Loans are easier as companies grow and interest rates are lower

Managerial economies; Better logistics, and improving efficiency

Marketing Economies; Better advertisement

Research and Development; innovation

Risk-Bearing economies; Takes risks with product ranges

What are the External Economies of Scale?

Improvement of Infrastructure

Education and Training Facilities

Concentration of Firms

Location

Define Labour market

Where workers sell their labour and employers buy their labour ; it consists of households Supply of Labour and Firms Demand for Labour

FACTS - Labour demand are for; qualifications, skills, geographical location, wage rates, conditions of employments, levels of competition, location of jobs

FACTS - Labour demand are for; qualifications, skills, geographical location, wage rates, conditions of employments, levels of competition, location of jobs

What are the Factors affecting the Supply and Demand of Labour?

State of the Economy

Increased Aggregate Demand

Wage rates

Real wages

Productivity of Labor

Profitability of firms

Size of working population

Non-monetary forces

Opportunities to boost income /earnings

Define Gross pay

The amount of money that an employee earns before and deductions are made

Define Net pay

The amount of money than an employee keeps after deductions are made

FACTS - Everyone pays National Insurance (NI), Income Tax and Pension/Retirement funds

FACTS - Everyone pays National Insurance (NI), Income Tax and Pension/Retirement funds

Define Money

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

Define 'Medium of Exchange'

Anything that sets the standard of value of goods and services accepted by both parties in the transaction

Define 'Rate of Interest'

The cost of borrowing money which is paid to the lender. It is also the reward of saving

What are the three main Financial Institutions?

Banks (Central and Commercial)

Building Societies

Insurance Companies

What is the Role of the Central Bank?

Issue Bank Notes

Control Monetary Policy

Provide Financial Stability

Manages Foreign Reserves

Act as a Bank for Commercial Banks and the Government

What is the role of Commercial Banks?

Accept Deposits

Make Payments on behalf of customers

Issue Loans

Offer safe Deposits of items

Offer Credit as a means of payment

What is a Building Society?

A mutual financial institution owned by its members. They take deposits (members savings) and lend them to members (in the form of mortgages) to buy property

What is an Insurance Company?

A company that guarantees compensation for specified loss, damage, illness and death in exchange for a premium (agreed payments)

What do Financial institutions provide?

Credit provisions; further increase economic activity (but create debt)

Liquidity provisions; make assets easily sellable for cash/money and or provide emergency funds such as overdrafts

Risk management; decrease risk of failure for business leading to more risky decisions which may result in innovations ; investment and stocks are apart of risk management

How do interest rates affect spending and savings?

As interest rates increase, prices increase therefore demand falls and spending decreases

As interest rates increase the reward for saving increases therefore saving increases

How do interest rates affect borrowing and investment?

As interest rates rise the cost of borrowing increases therefore the demand for borrowing falls and borrowing decreases

As interest rate rise investment also becomes more unattractive

- Evaluation of PED on consumers and producers -

Fully explain basic table/diagram (TE), Planning expenditure

Evaluation will be on context, substitutes, compliments, use of product

- Evaluation of PES on consumers and producers -

- Evaluation of Competition on consumers and producers -

Consumers; Drives prices down, Increases product range, Better quality of products

Producers; Pushes innovation, New technologies, Lowers production costs

- Evaluation of Productivity on the UK Government -

Government objectives of low unemployment may be damaged is because higher productivity (possibly from machinery) will be lead by factors of production other than labour

Higher productivity leads to a higher output meaning economic activity/growth is created (economic growth is an government objective) and therefore more tax revenue will be generated (budget surplus for a price stability (another government objective)

- Evaluate costs and revenues for a producer -

If total costs are less than total revenue than a profit is made. Vice versa for a loss. Quantity is directly linked to total costs and revenue. Costs may be a direct factor for price in certain specialized markets.

Vise versa for revenue, however high revenue encourages investments, consumer confidence and favorable interest rates on bank loans

- Evaluate losses and profits for a producer -

Profit SIGNALS TO SCARCE RESOURCES to move to more profitable firms. More profitable firms and larger firms are more efficient and productive.

Profitable firms will survive in a market and be less reliant on bank loans.

Profit from firms is used to FINANCE INVESTMENT FOR GROWTH AND EXPANSIONS

PROFITS ATTRACT MORE SCARCE RESOURCES (SUPPLIERS ARE MORE WILLING TO WORK WITH AND PROVIDE MORE FAVOURABLE DEALS)

- Evaluation of the Importance of the Financial sector for consumers -

Consumers can use Credit (credit cards) to purchase goods and services when they don't have enough money therefore increasing there QoL

Loans and mortgages make buying very expensive assets possible

Insurance allows safety from disaster (less risk)

Easily transfer assets into cash (liquidity)

However, debts are now possible to attain

- Evaluation of the Importance of the Financial sector for producers -

Producers can use Credit to purchase more raw materials when they don't necessarily have enough money therefore they can increase their output/quantity supplied

Loans can be taken for financing investments and growth

Insurance allows safety from disaster (less risk)

Easily transfer assets into cash (liquidity)

However, debts are now possible to attain

- Evaluation of the Importance of the Financial sector for the government -

The government uses Credit and takes loans from the Central bank (Spend money/allocate money when they don't necessarily have enough)

Credit increases economic activity therefore increasing Tax revenue

Insurance allows safety from disaster (less risk)

- Evaluation of the impact of specialization of workers -

Higher wages, increase QoL/standard of living, Increased job satisfaction,

Playing to their natural strengths

Boredom, Deskilling, Unemployment if their specialized trade becomes redundant

- Evaluation of the impact of specialization of producers -

Higher output, higher productivity, higher quality, bigger market, Economies of scale, Time saving (productivity and efficiency)

Output increasing leads to costs eventually rising, Dependency (risk of redundancy), Movement of workers, Failure to exchange

CHANG IN TASTES DETERMINES MOST OF

I'm going to get a 6, good luck I hope you actually used this unlike me

Good Luck!