Key Terms

A compliation of key terms used throughout this unit

Economic Growth

Measure of the increase in the value of goods and services produced from one time period to the next.

GDP

Gross Domestic Product; total value of final goods and services produced in an economy in one year.

GDP per Capita

the total value of goods and service produced in an economy divided by the population (assuming everyone has the same amount).

Opportunity cost

The cost of the good forgone when making a decision.

PPF

Production Possibilities Frontier; a graph that illustrates the maximum possible output combinations of two goods in an economy using limited resources and technology.

Interest

the cost of borrowing money, paid regularly for the use of borrowed money or the delaying of debt repayment

Boom

a period of economic growth, expansion, upturn

Wages

a fixed payment earnt from labour (work or services)

Recession

a period of economic decline, contraction, downturn. 2 quarters of negative economic growth.

Savings

money kept by consumers to be used in the future

Enterprise

a business or company (often producing goods and services)

Exports

the sending of goods or services to another country for sale

Taxation

revenue collected by the government, levied (income tax) or added onto items (GST)

Bargaining Power

the ability of one party in a negotiation to influences the terms, conditions, etc. to thier advantage

Rent

payment/income to an owner of a factor of production (or anything)

Human Development Index (HDI)

a measure of a country’s overall development, evaluating beyond economic growth

Pure market economy

all resources are privately owned and all economic decisions are made through consumers and produce, relying on supply & demand with no government involvement

Mixed market economy

combines private enterprise (capitalism) and government intervention (socialism/regulation) which allows for production, competition, and private ownship with government regulating public goods and social welfare

Planned economy (centrally-formed economy)

an economy in which production, investment, prices, incomes, etc. are all determined centrally by the government.

the economic problem

scarcity, the assumption that consumers have unlimited wants which cannot be satisfied with our limited resources

Factor market

a market for any input into the production process (factors of production)

Product market

the interaction of demand for and supply of the outputs of production

Market

a network of buyers and sellers seeking to exchange a product for a particular price, a place where buyers and sellers meet

Price Mechanism

brings supply and demand together to determine the price for each good and service

Productivity

the quantity of goods and services the economy can produce with a given amount of inputs (factors of production)

Factors of Production

the essential economic inputs; land, labour, capital, enterprise.

Economies of scale

decreasing per unit cost of production as the quantity produced increases

Diseconomies of scale

increasing cost per unit of production when output is increased for a sustained period of time

Technical Optimum

When a business is producing at their most efficient level, the average cost of production are at their lowest possible level.