Basic Economic Concepts Flashcards
define economics
economics is the study of how individuals and groups make decisions with limited resources so as to best satisfy their wants and needs. economics deals with the production, distribution and consumption of goods and services.
define market
a market is created when potential sellers are brought into contact with potential buyers. this doesn’t have to be direct contact. they come together to have a potential exchange for the seller (money) and for the buyer (the product)
define consumer sovereighnty
when people claim they are ‘working for themselves’ they actually mean they are working for the consumer. the consumer is the decider in which resources are allocated in a market economy. this is called consumer sovereignty
concept of opportunity cost
the opportunity cost is the loss of other alternatives when one alternative is chosen. it is what a person sacrifices when they choose one option over another.
what are the 3 economic questions
- what to produce
- how to produce
- for whom to produce
what are the economic resources
land
labour
capital
enterprise
land
natural resources from the earth such as
labour
human effort
capital
machinery and equipment
enterprise
the person/group who has the skill and ability tom combine economic resources to produce a good or service.
law of demand (consumer)
as the price of a good or service increases the demand for that good or service decreases. as the price decreases, the demand increases. (opposite relationship)
law of supply
as the price of a good or service increases the supply will also increase. as the price of a good or service decreases, supply will also decrease. (direct relationship)
capabilities of enterprise
decision making
financial skills
people skills
innovative
wants and needs are
unlimited
what to produce
customer demand guides the producer in making decisions to produce goods and services (consumer sovereignty : customer is king
how to produce
what combination of resources will be used to maximise efficiency therefore profit (revenue-expenses) (revenue is what you earn; expenses is the cost
for whom to produce
who will benefit from the good and service.
opportunity cost
economic decisions have economic consequences. when we decide to allocate resources in one area we miss out on something else. this is an opportunity cost, we miss out on these lost benefits
cost/benefit analysis
this is the process of weighing up positives and negatives on an economic decision pros / cons part time job / studying earning money / lose time for study experience new shoes
scarcity
limited resources
what is a want
it is a desire that people have for a particular good or service. these goods and services are not required for survival. a want is having a new Ferrari which isn’t required for survival.
distinguish between need and want
the difference between a need and a want is the necessity of the product to survive. with a need you require that g or s to survive whereas for that want it is something that you desire but don’t need for survival.
non price factor of demand
quality- consumer preference
complimentary products
substitute products
non price factor of supply
labour costs have increased therefore the cos of production increased
