Basics Flashcards
Consumer Surplus
Difference between what a consumer is willing to pay and what they do pay for a good or service
Scarcity
unlimited wants but limited resources
Opportunity Cost
most desirable alternative given up when you have to make a choice
FoP
Land, Labour, Capital, Enterprise
What shifts the PPC curve
Increase in the FoP
Private Sector
Part of the economy run by individuals and businesses
Public Sector
Part of the economy run by the government
Factor Payments
Payments for the FoP
Transfer Payments
When the government redistributes income e.g welfare, child support
Subsidies
Governments money to businesses
Law of Demand
There is an inverse relationship between price and quantity demanded
Law of Supply
There is a direct relationship between price and quantity supplied
Movements
Changes in price will cause a movement of a point along the supply and demand curves
Substitutes
Two goods that are similar e.g different brands of porridge
Increase in price of one good increases the demand for another
Complements
Two good thats are sold together e.g computer and mouse
Increase in price of one, decreases demand of the other
Normal Goods
As income increases, demand increases
Inferior Goods
As income increases, demand decreases
Law of Diminishing Marginal Returns
As variable resources are added to fixed resources, the additional output produced from each additional worker will eventually fall
GDP
Gross Domestic Product
Dollar value of all final goods and services produced within a country’s borders in one year
GDP per capita
GDP divided by the population
How much each person makes on average
Nominal GDP
measured in current prices
doesn’t account for inflation
Real GDP
Adjusts for inflation
Best measure of economic growth
Unemployment
Workers actively looking for a job but don’t have one
Labour Force
Number of people over 16 who are able and willing to work
Frictional Unemployment
Temporary unemployment when people are between jobs
Seasonal Unemployment
Due to time of year e.g x-mas jobs
Structural Unemployment
Changes in labour force make some skills obsolete
Workers must learn new skill to get a new job
Technological - where tech replaces some jobs
Cyclical Unemployment
Unemployment caused by a recession
As demand falls, demand for labour falls and workers are fired
Aggregate Demand
All the goods and services buyers are willing and able to buy at different price levels
Inverse relationship between rGDP and PL
