Productivity, markets and inflation

As productivity grows what happens?

Production of goods + services increases for the same amount of production work.

What is the OECD?

Organisation for Economic Cooperation and Development

According to the OECD productivity can be measured how?

Productivity can be measured by calculating GDP per hour worked.

What is GDP?

Gross domestic product

• Total value of goods and services produced nationally per hour.

What is a market?

When buyers + sellers come together, a market is formed.

Any place in which a customer or consumer can go through the process of purchasing goods or services from a provider.

What are 3 examples of markets?

• London Stock Exchange

• Hiring a lawyer

• Buying clothing online.

How is market price determined?

1. The amount that the buyer is willing to pay

2. The amount that the seller needs to at least cover their costs

What is inflation?

When demand for goods / services increases beyond production capabilities. Prices of goods + services rise dramatically.

How is inflation caused?

When production costs rise, prices of goods + services rise dramatically.

Why is inflation bad news?

When workers expect wages to increases to help maintain the cost of living. Businesses must raise prices to cover salary costs.