Basics Flashcards
Enterprise
The ability to take risks and run a business venture.
Individual benefits from profit.
Customer
An individual consumer organisation that purchases goods or services from a business.
Consumer
An individual who is willing and able to purchase goods and services for personal use
Consumer good
The physical and tangible goods sold to consumers that are not intended for resale.
These include durable consumer goods, such as cars and washing machines, and non durable consumer goods, such as food, drinks and sweets, that can be used only once.
Consumer services
The non-tangible products sold to consumers that are not intended fir resale.
e.g. hotel accommodation, insurance services, train journeys
Factors of production
The resources needed by business to produce goods or services.
Name the factors of production and their rewards
Land - Rent
Labour - Wages
Capital - Interest
Enterprise - Profit
Capital goods
the physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.
Enterprise
the action of showing initiative to take the risk to set up a business.
Land
refers to all the natural resources used in the production of goods and services
e.g. earth, lakes, rivers, forests
Labour
is the mental / physical effort people provide used in the production of goods and services
Capital
a human made good to produce other goods or services
Capital
a human made good to produce other goods or services
Rent
Owners of land require the payment of rent to supply these resources to people / organizations.
Interest
People and organizations that invest capital in firm receive interest.
Wages
People will supply their labour to firms in return for wages (payments)
Profit
A surplus of revenue from the sale of outputs over the cost of their production
Finite
Limited in supply
Economic problem
Scarcity of resources relative to unlimited human wants
Free goods
Are without limit.
Not possible to make a profit from free goods due to their abundance.
They can be consumed by many people at the same time, and without reducing the amount available to others.
(sunlight, air)
Economic goods
Are limited in supply.
People are therefore willing to pay to obtain these goods.
Due to their value, producers will attempt to supply them in order it make a profit.
e.g. oil, corn, gold, watches, bicycles
Consumption
The using up of goods and services to satisfy human wants and needs
Inputs
Resources, factors of production
Outputs
Products, goods and services
Factor mobility
The ability or ease with which factors of production can be moved or reallocated between different productive uses without incurring significant costs or a loss of output.
Occupational mobility
Ability to move factors of production between different productive tasks
(Capable of changing use)
Geographical mobility
Ability to move different factors of production to different locations
(Capable of moving from one location to another)
Factors of production may be moved
• within a firm
• between firms
• between industries
• between different countries
Opportunity cost
The benefit forgone by giving up the next best alternative use of scarce resources
Choosing one use of resources always means going without another
Production possibility curve
PPC
A PPC of a firm shows the maximum possible output combinations of two goods or services that it can produce with a given set of inputs consisting of factors of production.
Inefficiency (PPC)
Any point inside the curve.
Producing less than it can potentially do.
Unattainable (PPC)
Any point outside the curve.
Beyond the scope of the economy‘s existing resources.
Microeconomics
The study of market structure and the behaviour of individual producers and consumers
(individual markets)
Macroeconomics
The study of how a national economy works
3 questions every economy has to solve
• what to produce?
• who to produce it for?
• how to produce?
Economic system
How an economy allocates resources to competing productive activities and assigns the outputs or products of these activities to different consumers.,
Market economic system
An economic system in which decisions about how resources are used, what goods and services they produce and how they are allocated, are taken by private sector firms and consumers.
Planned economic system
An economic system in which the government determines what goods and services to produce, their prices and how they are allocated.
Mixed economic systems
A mixed economic system combines government planning and ownership of resources with the use of the free market economic system to determine the allocation of resources in the economy, that is what is produced, how and for whom.
Market
Any set of arrangements that allows producers and consumers to exchange goods and services.
Needs
Essential to human life e.g. shelter, food, clothing
Wants
Non-essential desires e.g. better housing, a yacht etc.
Due to scarcity, choices have to be made by…
Producers
Consumers
Workers
Governments
..about the most efficient use of these resources.
Resources
are the inputs required fir the production of goods and services
Economy
An area where people and firms produce, trade and consume goods and services.
(within town, country, globe)
Substitute goods
two alternative goods that can be used fir the same purpose
• they present the costumer with alternative choices
Substitute goods
two alternative goods that can be used fir the same purpose
• they present the costumer with alternative choices
Complementary goods
goods that are consumed together
Demand
all else being equal, as the price of a good increases, quantity demanded decreases; conversely
as the price of a good decreases, quantity demanded increases
Extension in demand
as the price of a product falls, quantity demanded rises/ extends
Contradiction in demand
as the price of a product increases, quantity demanded falls or contracts
