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 needs & wants
define a market
a market is one of the many varieties of systems, institutions, procedures, social relations, infrastructures whereby parties engage in exchange.
define consumer sovereignty
the situation in an economy where the desires & needs of consumers control the output of producers.
opportunity cost
opportunity cost is the lost alternative use to which resources could have been allocated, its the option foregone when choosing one option over another
-the lost opportunity in a decision between things
3 economic questions
are used to assist us in. allocation of scarce resources:
- what to produce?
- how to produce it?
- whom to produce it for?
economic resources: land, labour, capital &enterprise
land: natural resources
labour: human effort
capital: equipment/tools/machinery used to produce goods & services
what is the difference between needs & wants?
NEEDS: a need is something needed to survive. In economics, the idea of survival is real, meaning someone would die without their needs being met. This includes things like food, water, and shelter.
WANTS: A want, in economics, is one step up in the order from needs and is simply something that people desire to have, that they may, or may not, be able to obtain. e.g.. new clothes, car, makeup etc
what is the concept of scarcity?
the economic problem refers to the limited economic resources we have available to us and the unlimited needs & wants that we aim to satisfy with these resources
what are complementary products?
a complimentary good is a good with a negative cross elasticity of demand, in difference to a substitute good.
-This means goods demand is increased when the price of another good is decreased.
what are substitute products?
a complimentary good is a good with a negative cross elasticity of demand, in difference to a substitute good. Substitute products are the opposite of complementary.
-They are where the demand for a good is decreased when the price of another good is increased.
what is the law of demand ?
The law of demand states that as the price of a product increases demand decreases, and as the price decrease demand increases.
what are factors that could increase the demand of a product ?
- price of product itself
- non-price demand factors
- complementary products
- expectations
- preferences
- income
- substitute products
what is the law of supply?
the law od supply states that as the price of a product increases the producer is more willing to supply a product. whereas the price of a product decrease the producer is less willing to produce that product.
what are factors that could increase supply of a product?
- price of the product
- price of inputs (cost of making product)
- price of other product (competition products)
what is equilibrium ?
the equilibrium point is the optimum price that a product should be sold as, its where demand meets supply ( on a graph- point of intersection)
