OCR GCSE Economics - All Key Terms [WIP]

Consumer

A person or organisation that directly uses a good or service

Producer

A person, company or country that makes, grows or supplies goods and/or services

Government

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

Good

A tangible product, i.e. a product that can be seen or touched

Service

An intangible product, i.e. a product that cannot be seen or touched

Production

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

Factors of production

The resources in an economy that can be used to make goods and services, e.g. land, labour, capital and enterprise

Land

The factor of production that is concerned with the natural resources of an economy, such as farmland and mineral deposits

Labour

The factor of production that is concerned with the workforce of an economy in terms of both the physical and mental effort involved in production

Capital

The factor of production that relates to the human-made aids to production

Enterprise

The factor of production that takes a risk in organising the other three factors of production. The individual who takes this risk is known as an entrepeneur

Scarce resources

When there is an insufficient amount of something to satisfy all wants

Unlimited wants

The infinite desire for goods or service consumers would like to have

Economic problem

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

Opportunity cost

The next best alternative given up when making a choice

Economic choice

An option for the use of selected scarce resource

Economic sustainability

The best use of resources in order to create growth or development for a country, firm or individual, both now and into the future

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 natural world is small and possible to manage, now and into the future

Market

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

Market economy

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

Primary sector

The direct use of natural resources, such as the extraction of basic materials and goods from land and sea

Secondary sector

All activities in an economy that are concerned with either manufacturing or construction

Tertiary sector

All activities in an economy that involve the idea of a service

Product market

Market in which final goods or services are offered to consumers, businesses and the public sector

Factor market

Market in which the services of the factors of production are bought and sold

Specialisation

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

Exchange

The giving up of something that the individual or firm has, in return for something they wish to have but do not possess

Division of labour

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

Demand

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

Law of demand

For most products the quantity demanded varies inversely with its price

Individual demand

The demand for a good or service by an individual consumer

Market demand

The total demand for a good or service in a given time period, found by adding together all individual demands

Shift of the demand curve

A complete movement of the existing demand curve either outward (to the right) or inward (to the left)

Movement along the demand curve

When the price changes, leading to a movement up or down the existing demand curve

Tax

A compulsory payment to the government

Subsidy

An amount of money the government gives directly to firms to encourage production and consumption

Price elasticity of demand (PED)

The responsiveness of quantity demanded to a change in the price of the product

Inelastic demand

When the percentage change in quantity demanded is greater than the percentage change in price

Elastic demand

When the percentage change in quantity demanded is greater than the percentage change in price

Supply

The ability and willingness of firms to provide goods and services at each price in a given time period

Law of supply

For most products the quantity supplied varies directly with its price

Individual supply

The supply of a good or service by an individual producer

Market supply

The total supply of a good or service as a result of adding together all individual producers’ supplies

Movement along the supply curve

When the price changes, leading to a movement up (expansion) or down (contraction) on the existing supply curve

Price elasticity of supply (PES)

The responsiveness of quantity supplied to a change in the price of a product

Inelastic supply

When the percentage change in quantity supplied is less than the percentage change in price

Elastic supply

When the percentage change in quantity supplied is greater than the percentage change in price

Unitary supply

When the percentage change in quantity is the same as the percentage change in price

Price

The sum of money paid by a consumer to a producer for a good or service. It is determined by the interaction of supply and demand

Efficiency

The optimal production and distribution of scarce resources

Equilibrium price and quantity

Where the quantity supplied exactly matches the quantity demanded

Determination of price

The interaction of the free market forces of demand and supply to establish the general level of price for a good or service

Allocation of resources

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

Market forces

Factors that determine price levels and the availability of goods and services in an economy without government intervention

Competition

Where different firms are trying to sell a similar product to a consumer

Monopoly

A sole producer or seller of a good or service

Oligopoly

Where a small number of firms control the large majority of market share

Profit

The difference between the revenue received from the sale of a good or service and the costs involved in making and/or selling the good, including any opportunity costs

Production

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

Productivity

One measure of the degree of efficiency in the use of factors of production in the production process. It is measured in terms of output per unit of input

Total cost

All the costs of the firm added together

Average cost

The cost of producing a unit (unit cost of production)

Total revenue

The total income of a firm from the sale of its goods and services

Average revenue

The revenue per unit sold

Loss

When a firm’s revenue is less than its costs, i.e. TR < TC

Economies of scale

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

Labour market

Where workers sell their labour and employers buy the labour: it consists of households’ supply of labour and firms’ demand for labour

Supply of labour

The total number of people who are willing and eligible to supply their labour, including the unemployed

Gross pay

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

Income tax

A tax levied directly on personal income, i.e. a tax on a person’s wages

National insurance

A contribution paid by workers, and their employers, towards the cost of state benefits

Net pay

The amount of money that an employee is left with after deductions are made from the gross income

Pension contributions

Payments made to a pension fund. If you are employed, contributions are usually from three sources - the employee, the employer and the government

Money

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

Medium of exchange

Anything that sets the standard of value of goods and services acceptable to all parties involved in a transaction

Financial sector

Consists of financial organisations and their products, and involves the flow of capital

Investment

The purchase of capital goods that are used to produce future goods and services. It is also an asset purchased to provide an income in the future and/or to be sold at a profit

Rate of interest/interest rate

The cost of borrowing money, i.e. that which is paid to the lender. It is also the reward for saving

Building society

A mutual financial institution that is owned by its members. Its primary objectives are to receive deposits from its members and to lend money for members to purchase property

Mortgage

An agreement with a financial institution to borrow money to purchase a property

Insurance company

Financial institution that guarantees compensation for specified loss, damage, illness or death in return for an agreed premium

Saving(s)

The part of a person’s (disposable) income which is not spent on consumption. Savings are done by savers

Borrowing

To receive money from another party with the agreement that the money will be repaid

Economic growth

Growth in GDP (value of output) over time

Gross domestic product (GDP)

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

GDP per capita

GDP divided by the population

Boom

A period of high economic activity and high levels of employment

Recession

A period of time when the country’s GDP falls for two (or more) consecutive quarters

Labour force (or workforce)

The number of people who work in a country

Employment

The use of labour in the economy to produce goods and services

Unemployment

Occurs when workers able and willing to work at the current wage rates are unable to find employment

Claimant count

The method of measuring unemployment according to the number of people who are claiming unemployment-related benefits

Level of unemployment

The number of people in the working population who are unemployed

Rate of unemployment

The percentage of the country’s workforce that is unemployed

Seasonal unemployment

Lack of employment caused by a fall in demand during a particular season

Frictional unemployment

Lack of employment caused by time lags when workers move between jobs

Cyclical unemployment

Lack of employment caused by a lack of demand in the economy

Distribution of income

How incomes are shared out between individuals and households

Income

The reward for the service provided by a factor of production, including labour