Studied by 2 people
Consumer
A person or organisation that directly uses a good or service
Producer
A person
Government
A political authority that decides how a country is run and manages its operation
Good
A tangible product
Service
An intangible product
What is the difference between a good and a service?
A good is tangible
Production
The total output of good and/or 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 or services
What are the factors of production?
Capital
Enterprise
Land
Labour
(CELL)
What is Capital?
The factor of production that relates to the human-made aids to production
Give examples of Capital...
Lorries
What is Enterprise?
The factor of production that takes a risk in organising the other three factors of production. The individual who takes the risk is known as an entrepreneur
Give examples of Enterprise...
A software company that relies primarily on the labour of skilled software engineers
What is Land?
The factor of production that is concerned with the natural resources of an economy
Give examples of Land...
Agriculture
What is Labour?
The human input into the production process
Give examples of Labour...
Builder
What is the Basic Economic Problem?
Unlimited wants but scarce resources
Scarce Resources
When there is an insufficient amount of something to satisfy all wants
Unlimited Wants
The infinite desire for something which is not a necessity
Need
A necessity essential for survival
Want
Something a consumer would like to have
Economic Problem
How to best use limited 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 resources
Economic sustainability
The best use of resources in order to create responsible development or growth
Social sustainability
The impact of development or growth that promotes an improvement in quality of life for all
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
Renewable resources
Resources that can be replaced as long as they are not overused e.g. solar power
Non-renewable resources
Resources that cannot be replaced once they are used e.g. oil
Market
A 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
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
Factor Market
Market in which the services of the factors of production are bought and sold
Product Market
Market in which final goods and services are offered to consumers
Exchange
The giving up of something that the individual or firm has
Specialisation
The process by which individuals
Division of Labour
When workers specialise in
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
Movement Along the Demand Curve
When the price changes
Shift of the Demand Curve
A complete movement of the existing demand curve either outward (to the right) or inward (to the left)
Subsidy
An amount of money the government gives directly to firms to encourage production and consumption
Tax
A compulsory payment to the government
Elastic Demand
When the 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 the percentage change in price
Price Elasticity of Demand (PED)
The responsiveness of quantity demanded to a change in the price of the product
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 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
Shift of the supply curve
The complete movement of the existing supply curve either outward (to the right) or inward (to the left)
Elastic Supply
When the percentage change in quantity supplied is less than the percentage change in price
Inelastic Supply
When the percentage change in quantity supplied is less than the percentage change in price
Price Elasticity of Supply (PES)
The responsiveness quantity supplied to a change in the price of the product
Price
The sum of money you have to pay 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 quantity supplied exactly matches quantity demanded
Allocation of Resources
How scarce resources are distributed among producers
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
Market Economy
An economy in which scarce resources are allocated by the market forces of supply and demand
Market Forces
Factors that determine the price levels and the availability of goods and services in an economy without government intervention
Excess Demand
When quantity demanded exceeds quantity supplied
Excess Supply
When quantity supplied exceeds quantity demanded
Market Economy
An economy in which scarce resources are allocated by the market forces of supply and demand
Competition
Where different firms are trying to sell a similar product to a consumer
Price Competition
Firms lower prices to gain customers
Non-price Competition
Competing through methods other than price such as marketing
Competitive Markets
Many relatively small firms that do not have control of the price
Monopoly
A sole producer or seller of a good or service
Oligopoly
Where a small number of firms control the large majority of the market share
Labour Market
Where workers sell their labour and employers buy the labour: it consists of households' supply of labour and firms' demand for labour
Demand for Labour
The total number of workers an employer is willing and able to hire. This depends on the demand for the product that labour helps to produce (derived demand)
Supply of Labour
The total number of people who are willing and eligible to supply their labour
Trade Union
An organisation of workers that is active on behalf of its members: for example increasing wages and salaries and improving working conditions
Labour Immobility
Labour cannot move freely from one job to another
Salary
Yearly wage divided equally in 12 (monthly) parts
Pay
The amount of money that an employee earns. Can be used to refer to both wages (wage rate) and salary
Gross Pay
The amount of money that an employee earns before any deductions are made
Net Pay
The amount of money that an employee is left with after deductions are made from gross income
Income Tax
A tax levied directly on personal income
National Insurance
A contribution paid by workers
Pension
A fixed amount paid at regular intervals to a person (usually retired)
Bonus
A sum of money added to a person's wages as a reward for good performance
Overtime Payment
A sum of money added to a person's wages based on time time worked in addition to one's normal working hours
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
Investment
The purchase of capital goods that are used to produce future goods and services. Also an asset purchased to provide an income in the future and/or to be sold at profit
Interest Rate
The cost of borrowing money
Loan
Amounts of money that a bank gives a customer for a set period of time
Note 
Flashcard (93)