person, firm or organisation who directly uses a good or service
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producer
individual or firm or country that makes, supplies grows a good or service
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government
political authority that decides how a country should be run and manages its operations
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interdependence
when one group responds to or is affected by the actions of another
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factors of production
resources that can be used in an economy to produce goods and services
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land
natural resources available for production
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labour
human input into the production process
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enterprise
organises the factors of production and take risks
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capital
man-made aids to production
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scarcity
when there are insufficient resources to satisfy all wants
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unlimited wants
infinite desire for something
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needs
something a consumer has to have to survive
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wants
something a consumer would like to have which is not required for survival
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economic problem
how best to use limited resources to satisfy unlimited wants
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economic choice
option for the use of scarce selected resources
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opportunity cost
value of the next best alternative foregone
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economic sustainability
how best to utilise scarce resources in order to create responsible development, now and into the future
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social sustainability
impact of development or growth that promotes an improvement in quality of life for all, now and into the future
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environmental sustainability
impact of development or growth where the effect on the environment is small and possible to manage, now and into the future
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market
way of bringing together buyers and sellers in order to buy and sell goods and services - involves specialisation
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market economy
economy in which scarce resources are allocated by market forces of supply and demand
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primary sector
extraction of raw materials
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secondary sector
manufacture and construction
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tertiary sector
goods and services
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factor market
where the services of factors of production are bought and sold
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product market
where final goods and services are sold
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specialisation
the process by which individuals, firms, regions and whole economies concentrate on producing the product they are best at
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exchange
the act of giving up something the individual or firm has for something they want but do not possess
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division of labour
where workers specialise or concentrate on one area of the production process
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demand
the willingness and ability to purchase a good or service at a given price in a given time period
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individual demand
demand for a good or service by an individual consumer
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market demand
total demand of all consumers for a good or service
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law of demand
for most products, quantity sold varies inversely with price
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price elasticity of demand
responsiveness of quantity demanded due to a change in price
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elastic demand
where percentage change in quantity demanded is greater than percentage change in price
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inelastic demand
where percentage change in quantity demanded is smaller than percentage change in price
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supply
willingness and ability of producers to supply a good or service at a given price in a given period of time
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individual supply
supply of a good or service by an individual producer
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market supply
total value of all individual supply added together
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law of supply
quantity supplied varies directly with price
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price elasticity of supply
responsiveness of quantity supplied due to a change in price of the product
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elastic supply
when percentage change in quantity supplied is greater than the change in price
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inelastic supply
when percentage change in quantity supplied is less than percentage change in price
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price
sum of money you have to pay for a good or service - determined by market forces of supply and demand
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worth
value placed on a good or service by an individual
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allocation of resources
how scarce resources are distributed amongst producers and how scarce goods and service are distributed amongst consumers
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determination of price
interaction of the free market forces of supply and demand to establish a general price level for a good or service
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equlibrium price
where quantity supplied exactly matches quantity demanded
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market forces
factors that determine price levels and the availability of goods and services in an economy without government intervention
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price signalling
price changes signal where resources are needed, if demand for a good rises, its price will rise, signalling more resources should be devoted to producing this good
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transmission of preferences
higher prices encourage the business to produce more businesses profit from producing what consumers want
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rationing
prices help ration scarce resources - when resources are scarce, prices rise, so only those willing and able to pay are allocated these resources
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competition
when different firms are trying to sell a similar product to a consumer
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monopoly
sole producer of a good or service - legally if they own 25% of the market
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oligopoly
where a small number of firms dominate a market
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production
total output of goods and services produced by a firm or industry in a given time period
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productivity
output per unit of input - efficiency in use of factors of production
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fixed costs
costs that do not change with output
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variable costs
costs that vary with output
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average cost
cost of producing one unit
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calculating average costs
total cost/output
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total revenue
total income of a firm from the sale of goods and services
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calculating total revenue
price x quantity sold
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average revenue
revenue per unit sold
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calculating average revenue
total revenue / quantity sold
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profit
amount of money a producer is left with after all costs have been paid - when total revenue is greater than total cost
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loss
when a firm's revenue is less than its costs
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economies of scale
cost advantages a firm can gain by increasing the scale of production., leading to a fall in average costs
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internal economies of scale
due to the growth of the firm itself
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external economies of scale
those a firm benefits from as a member of an industry or those which are outside of its control
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labour market
where workers sell and employers buy labour - interaction of the two gives the price of labour (wage rate), and quantity supplied and demanded
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derived demand
when the demand for labour depends on the demand for the product the labour helps to produce
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gross pay
the amount of money an employee earns before taxes and other deductions are made
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net pay
amount of money an employee receives after deductions are made from gross income
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income tax
tax directly levied on personal income
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national insurance
contribution paid by workers and their employers towards state benefits
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pension
fixed amount paid at regular intervals to a usually retired person
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money
anything generally accepted as a means of payment - a medium of payment
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financial sector
consists of financial organisations and their products, involves the flow of capital
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medium of exchange
anything that sets the standard value of goods and services and is acceptable to all involved in the transaction
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building society
a mutual financial institution that is owned by its members with the objective to receive deposits from its members and lend money to other members to purchase property
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insurance company
financial institution that guarantees compensation for a specified loss, damage, illness or death in return for an agreed premium
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credit provision
credit is when consumers, producers and government can borrow money to buy goods and services without having to save up
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liquidity provision
liquidity - how easy it is to turn an asset into cash - bank allows consumers and producers to function when faced with unexpected demands for cash by offering loans and overdrafts
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risk management
finance managers group many savers together and invest into a range of companies - individual investors would not be able to do this on their own and would invest in a smaller range of companies, increasing risk
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mortgage
agreement with a financial institution to borrow money to purchase a property
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interest rates
cost of borrowing and reward for saving
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investment
the purchase of capital in order to produce future goods and services
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gross domestic product
total value of goods and services produced in a country in a year
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economic growth
growth in the value of output over time
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GDP per capita
GDP / population
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recession
period of negative economic growth for two or more consecutive quaters
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boom
period of high economic activity and employment
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labour force
number of people who work in an economy
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employment
use of labour in the economy to produce goods and services
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unemployment
occurs when workers willing and able to work at the current wage rates are not able to find employment
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claimant count
method of measuring unemployment according to the number of people claiming unemployment-related benefits
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level of unemployment
number of people in the working population who are unemployed
Studied by 1 person
