Basic economic concepts Section Flashcards
Define market
Market refers to the buyers and sellers of goods and services. Manufacturers, suppliers and purchasers are part of the market place
Define consumer sovereignty
Consumer sovereignty is when the customers are in charge of the market place. Thier general opinion affects what is put out in the stores
Concept of the opportunity cost
Opportunity costs refers to the best alternative that is given up when we make once choice over another. If the price of a meat was too expensive, the Oppurtunity cost can be a cheaper meat
3 economic questions?
Where to produce? How to produce? For who to produce?
Economic resouces
Land- refers to natural resources eg fertile pastures for crops or trees to provide wood
Labour- Labour is the “person power” . This means the resource that is availble to work in the production process
Capital- the machinery plant and buildings made by people to assist in the manufacture of servies
Enterprise- the skills by some people to accurately perceive market opportunities. These people are called entrepreneurs
Difference between needs and wants
Needs are things that are essential for our survival where as wants are not essential. Needs are items that have scarcity such as food and water where as wants can be unlimted such as cars or camera
Concept of scarcity
Scarcity is the gap between what customers want and what is produced. It is not always possible to have a product that people want and have all the resources for it
Complementary and substitute products
Supplementary are goods that can be used as an alternative instead of another eg butter and margarine.
Complementary goods is when the demand for one good generates demand for the other eg bike and bike helmets
Law of demand
Law of demand states that consumers are more willing to buy a product the cheaper the price. When the price increases the level of demand decreases
Factors that can increase demand of a product
An effective advertisment, change in weather, a change of fashion or an increase of income
Law of supply
The higher the price that can be gained for an item, the more that will be supplied and vice versa
Factors that could increase supply of a product
Avalibillity of resources (new discovery of materials), costs of resources ( lower tax rate or interest) and efficiency in resource use ( better training of workers)
Defintion of economics
Economics deals with the production and distribution of goods and services and their managment in the market
What is the equilibrium price?
The e.p is the price at which consumer demands equals the supply of goods. the e.p contains enough profit to motivate producers to make the product
