basic economic concepts Flashcards
definition of economics
economics is the study of how wealth is created and distributed. Also of how and why decisions are made regarding the use of distribution of economic resources.
definition of market
A market is the situation where potential buyers are in contact with potential sellers and there is a means for exchange. The market for a particular item is made up of existing and potential customers who need it, and have the ability and willingness to pay for it.
definition of consumer sovereignty
consumer sovereignty is where the consumer ultimately decides how the resources are used. It is where the consumer is king in deciding where resources are allocated in a market economy.
definition of concept of opportunity costs
is the value of something that is lost because you choose an alternative course of action.. whenever an economic decision is made about how an economic resource is going to be used something else or an alternative use for that resource is forgone. e.g. if you choose to spend your money on going to a movie. it may mean that you have to forgo something else such as buying a tee shirt.
what are the three economic resources and description
land- any natural resource. such as trees,sun,wind,water. it is what we grow.
labour- any human service (physical or intellectual)
capital- not money. machinery and equipment such as computers
entrepreneurship- someone who reconciles a profit opportunity, is able to organise the resources and is willing to accept rules.
what is the difference between a need and a want
a consumer need is based around human survival where as a consumer want is based to satisfy a consumer
what is the concept of scarcity
the fundamental economic problem of having seemingly unlimited human wants in a productive resource to fulfil all human wants and needs.
complimentary and substitute products
if the price of substitute products increases, the demand for your product usually increases as consumers switch your product. e.g. if the price of coffee increases people may switch to drinking tea as a result.
Price of compliments products: complenetry products ‘go with’ another. they are products that are sold desperately but are used together, each creating a demand for the other, for example, computers and computer programs.
what is law of demand
law of demand Staes that the consumer demand is inversely proportional to the movement in price of the product. lower prices stimulate demand, whilst higher prices dampen it.
factors that could increase the demand of a product
price, as a price decreases demand rises. income levels a persons income rises they are able to purchase more goods and services. consumer tastes are preferences which involves persuasive advertising.
what is law of supply
the higher the price that can be gained for an item the more that will be supplied and vice versa
facts that could increase the supply of a producer (ACE)
the higher a pice can be gained for an item, a product is sold for the more suppliers are willing to supply. Technology, better tech means supply increase because can produce same amount for less.
equilibrium
is the price where consumer demand equals the supply of goods, where the demand and supply lines intersect. the equilibrium price contains enough profit to motivate producers to make the product.
