Definitions Flashcards
Consumer
A person or organisation that directly uses a good or service
Producers
A person, company or country that makes, grows or supplies goods or services
Government
A political authority that decides how a country is run and manages its operations
Factors of production
The resources in an economy that can be used to make goods and services. Capital, Enterprise, Land and Labour
Scarce resources
When there is an insufficient amount of something to satisfy all wants
Unlimited wants
The infinite desire for something
Economic problem
How to best resources to fit the unlimited wants of people
Opportunity cost
The next best alternative when making a choice
Economic choices
An option for the use of scarce resources
Economic sustainability
The best use of resources in order to create responsible development or growth, now and for the future
Social sustainability
The impact of development or growth that promises an improvement in the quality of life for all, now and into the future
Environmental sustainability
The impact of development or growth where the effect on the environment is small and possible to manage, now and into the future
Market
A way of bringing buyers and sells to buy and sell goods and services
Primary sector
The direct use of natural resources, such as the extraction of basic materials and goods from land and sea
Secondary sector
All activities in an economy that are concerned with either manufacturing or construction
Tertiary sector
All activities in an economy that are involved in a service
Goods
A tangible product
Services
An intangible product
Factor market
Market in which the services of the factors of production are bought and sold
Product market
Market in which the final goods or services are offered to consumers, businesses and the public sector
Specialisation
The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing
Exchange
The giving up of something that the individual or firm has, in return for something they wish to have but do not possess
Demand
The willingness and ability to purchase a good or service at the given price in a given period of time
Demand curve
A line which represents the amount of a good or service a consumer is willing and able to buy. There is a negative relationship between price and quantity
Price elasticity of demand
The responsiveness of quantity demanded to a change in the price of the product
Supply
The willingness and ability to produce a good or service at the given price in a given period of time
Supply curve
A line which represents the amount of a good or service a firm is willing and able to produce. There is a positive relationship between price and quantity
Price elasticity of supply
The responsiveness of quantity supplied to a change in the price of the product
Price
The sum of money you have to pay for a good or service. It is determined by the interaction of supply and demand
Equilibrium price
The price where the quantity supplied exactly matches the quantity demanded
Equilibrium quantity
The output level where the quantity supplied exactly matches the quantity demanded
Determination of price
The interaction of the free market forces of demand and supply to establish the eternal level of price for a good or service
Allocation of resources
How scarce resources are distributed among producers and how scarce goods and services are allocated among consumers
Market forces
Factors that determine price level and the availability of goods and services in an economy without government intervention
Competition
Where different firms are trying to sell a similar product to a consumer
Market economy
An economy in which scarce resources are allocated by the market forces of supply and demand
Monopoly
A sole producer of a good or service
Oligopoly
Where a small number of firms control the large majority market share
Competitive market
A market where there are lots of sellers, selling identical products
Production
The total output of goods and services produced by a firm or industry in a time period
Productivity
One measure of the degree of efficiency in the use of factors of production in the production process. It is measured in terms of output per unit of input
Total cost
All the costs of a firm added together
Average costs
The cost of producing a unit
Total revenue
The total income of a firm from the sale of its goods and services (price x number sold)
Average revenue
The revenue per unit sold (total revenue / number sold). Equal to the price.
Profit
When a firms revenue is greater than its costs TR > TC
Loss
When a firms costs are greater than its revenue TR
Fixed costs
Costs which do not vary with output - for example, rent.
Variable costs
Costs which do vary with output - for example, rent.
Economies of scale
The cost advantages a firm can gain by increasing the scale of production leading to a fall in average costs
Labour market
Where workers sell their labour and employers buy the labour: it consists of households’ supply of labour and firms’ demand for labour
Gross pay
The amount of money that an employee earns before any deductions are made
Net pay
The amount of money that an employee is left with after deductions are made from the gross income
Income tax
A tax levied directly on a persons income/wages
National insurance
A contribution paid by workers, and their employers, towards the cost of state benefits
Pension
A regular payment to people of retirement age. A contribution is deducted from gross salary each month towards this
Money
Anything that is generally accepted as a means of payment for goods and services
Medium of exchange
Anything that sets the standard of value of goods or services acceptable to all parties involved in a transaction
Financial sector
Consists of financial organisations and their products, and involves the flow of capital
Banks
Financial institutions licensed to take deposits and make loans
Building societies
A mutual financial organisation that is owed by its members
Insurance
Financial institution that guarantees compensation for specified loss, damage, illness or death in return for an agreed
Interest rates
The cost of borrowing money (paid to the lender) and the reward for saving
Saving
Part of an individual’s income which is not spent on consuming goods and services
Borrowing
Receiving money in exchange for an agreement to pay it back in the future.
Investment
The purchase of capital goods that are used to produce future goods and services. It is also an asset purchased to provide an income in the future and/or to be sold at a profit.
