Basic Economics Flashcards
Define Economics
The study of how individuals and groups make decisions on how to use our limited resources to satisfy there needs and wants
Define market
A market is an open area where buyers and sellers go to trade goods and services for money. It is usually held in a popular community place that’s easily accessed
Define consumer sovereignty
The consumer is the king in deciding what resources are allocated in a market economy. This means entrepreneurs are working for the consumer
Opportunity cost
The lost alternative use to which the economic resources have been allocated
Example: if I decide to set up an Italian restaurant over a Greek one the lost alternative would have been the Greek restaurant.
It’s whatever you didn’t go with
The 3 economic questions
How to produce?
What to produce?
For whom to produce?
Land reasource
Any research which occurs naturally.
Example: mineral resources, forests, water, oceans for fishing/ tourism.
Labour reasource
The ‘work’ input. The physical or mental contribution by people to transform other elements in the mix.
Example: carpentry, teaching, waiter, chefs, bar staff, accountant, dish pig, cleaner
Capital resource
Any man made item used in the production process.
Examples: hammers, computers, fences, oven, chair
Enterprise resource
A specific skill used by people and could b considered a subset of the labour resource.
Enterprise I’d when a person uses their initiative, drive and personal goals to start and maintain a business.
Example: bill gates used enterprise for Microsoft
Difference between a need and a wants
A need is something you can live without like a doughnut it’s something that isn’t needed for your survival.
Whereas
A want is something you need to survive you cannot live without it like water.
Law of demand:
Demand is the quantity of a particular good or service that consumers will purchase at a given price. Price is a measure of relative scarcity.
Factory that could increase the law of demand
- advertising
- weather
- change in fashion/ taste
- increased income
- increase or decrease in prices
Law of supply
States that producers supply more at a higher price, because selling a higher quality at a higher price increases revenue.n
Supply is the total quantity of a good or service that producers or suppliers are willing to produce at any given price and time
Factors that could increase supply of a product (ACE)
Availability of resources: - increased labor force - good climate conditions - new discoveries in raw materials such as iron, copper. Cost of resource: - lower tax rates - lower wages - lower interest rates - lower costs of raw materials Efficiency in resource use: -better training for workers - new machinery which increases productivity rates - new production methods which reduce waste amounts.
Distinguish between a good and a service
A good is any tangible item that can he handled and stored before given out to consumers, whereas a service is something you do for others in return for a payment
