Economics GCSE book

literal word for word book definitions/explanations

What are the main economic groups?

consumers, producers, government

Consumer

A person who purchases goods and services for personal use

Good

a tangible product (touchable, visible)

Government

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

Producer

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

Service

An intangible product (untouchable, invisible)

Production

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

Interdependence

where one economics group responds to and is influenced by different economic groups in an economy

VAT

Value Added Tax - a tax on goods and services

What are the factors of production?

Land, Labour, Capital, Enterprise

Factors of production meaning

The resources in an economy that can be used to make goods and services

Land

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

Labour

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

Factor of production that relates to the human-made aids to production

Enterprise

Factor of production that takes a risk in organising the other three factors of production. An entrepreneur takes this risk

Example of land resource

oil, coal, trees, sea, ground itself

Example of labour resource

farmers, healthcare workers

Example of a capital resource

machinery, tools, factory buildings, transport, infrastructure such as: roads, electricity network

Example of entrepreneurs

Bill Gates (microsoft), Deborah Meaden (businesswoman and Dragons' Den star), Anita Roddick (Body shop)

Effects on Labour resource

size of population, impact of migration, working age in country, quality of labour (extent of education and health of population)

Order of factors of production

Enterprise, Land Labour Capital (entrepreneur decides quantities of the diff factors of production to combine and organise them during production), Goods and services produced

The basic economic problem

the mismatch of unlimited wants and needs and limited economic resources (scarce resources)

Scarce resources

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

Unlimited wants

The infinite desire for something

Examples of scarce resources

housing with a growing population, oil, land, doctors

Need

Basic requirement for survival

Want

an item that a consumer desires but that is not essential to survival

Examples of Needs

food, water, shelter, clothing

Examples of Wants

Fancy car, TV, Designer clothing

How should resources be allocated?

To try best use limited resources to satisfy the unlimited wants of people

UK approach to the economic problem

Free education and free healthcare lets consumers choose how to use their money to provide for other wants and needs

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, 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 environment is small and possible to manage, now and into the future

Renewable resources

resources that can be replaced by natural processes in a relatively short amount of time

Non-renewable resources

resources that cannot be replaced naturally or by humans

What is a market?

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

Market economy

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

Examples of markets

physical markets with stallholders (sellers), shops where the seller is the homeowner, auctions where the selling price is determined by how many buyers there are and what they are prepared to pay, through the internet or catalogues sent through the post

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 a 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

What is a factor market?

labour markets, the markets for raw materials, the capital market, entrepreneurial market

Product market

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

What is a product market?

food from supermarkets, spare car parts for a garage, stationary supplies for an office

Price of product

The price of products are determined by the interaction of demand and supply of a product

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

Costs for producers

As output increases, costs may eventually rise, Dependency: production of goods and services depends on all parts working well, Failure of exchange, Movement of workers: workers leave from boredom

Benefits for producers

Higher output, Higher productivity, Higher quality, Bigger market, Economies of scale, Time saving

Higher quality

the best and most suitable factors of production can be employed to produce the output

Bigger market

if all producers specialise, then for each product there should be more buyers for each producer

Economies of scale

larger output will enable the producer to gain economies of scale

Higher productivity

workers specialising in a task become more skilled

Higher output

Total production of goods and services is raised and quality can be improved

Division of labour

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

Benefits for workers

Increased skill, Natural strengths, Increased job satisfaction, Increased standard of living

Costs for workers

Boredom, Deskilling: lose other skills and are less able to respond to changes in demand,
Unemployment: deskilling and therefore tougher to find a job if there is a fall in demand for a particular product

Adam Smith

Generally known as the founding father of economics and his theory is known as the invisible hand

Costs for regions

Risk of fall in demand, resource exhaustion, loss of advantage

Risk of fall in demand

if demand falls due to changes in taste and fashion, then industry will collapse or shrink, leading to resource wastage

Resource exhaustion

if raw materials are no longer available, then those employed in the industry become unemployed

Benefits for regions

efficient use of resources, creates jobs for residents, infrastructure development

Efficient use of resources

region could specialise in particular industry due to availability of resources

Creates jobs for residents

development of industry in particular region helps residents find work near to their homes

Infrastructure development

region that specialises in particular industry will develop both infrastructure and supply industries ti support that industry, leading to further regional development

Benefits for countries

Economies of scale and efficiency, More jobs, international trade, improved standard of living, Government revenue

Economies of scale and efficiency

countries will specialise in what they do best, leading to greater efficiency and economies of scale, increasing countries output

More jobs

increased output may result in more investment and job creation

International trade

Exchanging goods and services between countries. if country specialises then it will no longer produce some goods that are wanted, but will have a greater amount of its specialist products.

Improved standard of living

increased choice, income, output and infrastructure

Government revenue

increase in output, income and trade, leads to greater revenue from taxes for the government

Costs for countries

Unemployment, Over-dependence, Over-exploitation of resources, Negative externalities

Unemployment

As specialisation changes, workers in the declining industry may not be able to find new jobs, as they lack necessary skills

Over-dependence

countries can over-specialise and become dependent on one or a very small number of products. If world demand changes, these industries and country's economy may collapse

Over-exploitation of resources

output may be increased by over-exploiting resources, leading to unsustainable development

Negative externalities

over-exploitation of resources and/or production can lead to serious environmental damage

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, found by adding together all individual demands

Movement along the demand curve

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

Demand curves slope

downward

Shift of the demand curve

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

We assume that consumers

act rationally

Non-price factors affecting demand curve

Trends/fashion, Govt. Healthcare advice, Advertising a campaign, Climate/Temperature, Price of substitute or complement, Change in income

Complements

two goods that are bought and used together

Substitutes

goods and services that can be used in place of each other

subsidy

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

Tax

a compulsory payment to the government

Extension of demand

A rise in the quantity demanded caused by a fall in the price of the product itself

Contraction of demand

a fall in the quantity demanded caused by a rise in the price of the product itself

price elasticity of demand

a measure of the sensitivity of demand to changes in price

Elastic demand

demand in which changes in price have large effects on the quantity demanded

Inelastic demand

demand in which changes in price have little or no effect on the amount demanded, usually a necessity

Inelastic demand causes

necessities, few substitutes, heavily branded
examples: petrol, medicines, alcohol, cigarettes

Elastic demand causes

non-branded, non-necessities, many substitutes
examples: broccoli, tinned food, pens