Definitions - Enterpise & the Economy / Price Mechanism Flashcards
Economics
Economics is the study of the decisions, outcomes, and activities that occur as a result of a scarcity of resources. it is study of how society uses its limited resources to satisfy unlimited needs and wants
The Economic Problem / Scarcity
The basic economic problem is because people have unlimited wants but resources are limited. People have to make choices about what needs and wants are most important ti satisfy.
Needs
The goods and services that people believe are necessities of life and including food, clothing, water, healthcare, and shelter
Wants
Foods and services that assist us to enjoy a good standard of living EG. phones, cars, tv. they are things we want rather than things we need to survive
Land / Natural or Land Resources
Natural resources are useful raw materials that we get from earth. They occur naturally meaning humans cannot make them. EG. mineral resources, forests, fertile agricultural land, water and oceans for fishing and tourism
Labour
Human resouces describe the human work effort, both physical and mental. used in the production of goods and services. EG. carpentry, teaching and flying planes
Capital
All capital equipment (machinery, buildings, infrastructure) used by human labor in the process of production. EG. hammers, computers, desks, and fences
Enterprise
Enterprise is when a person uses their initiative, drive and personal goals to start and maintain a business. EG. bill gates uses enterprise to set up Microsoft
Goods
Goods are defined as items that satisfy human wants, provide utility or usefulness, and are scarce (have limited availability). And also be capable of being transferred from one person to another or produced and consumed.
Services
Service is the result of work or resources provided by a service provider, delivering value to the customer. It represents the value the customer receives or purchases from the provider
Price Mechanism
Price Mechanism is the system whereby producer supply and consumer demand interact in the market place to set prices for goods and services
The Law of Demand
As the price of an item decreases, the quantity of that item that will be demand by the market will increase as prices increase consumers will be less willing and able to pay and demand will increase
other words: The cheaper something is the more we will buy
The Law of Demand 2
The Law of Demand states that more of a good will be bought, the lower its price and less of it will be bought the higher its price
In simple terms the law of demand states that theres an inverse relationship between the price and the quantity demanded of a good service
The Law of Supply
As the price of an item increases the quantity of that item that will be supplied by producers will increase. when the item decreases producers will be less willing to supply and therefore supply will fall
The Law of Supply 2
The Law of supply states that more of a good will be offered for sale (provided) the higher its price and less will be offered for sale the lower its price
In simple terms the law of supply states that theres a inverse relationship between the price and the quantity supplied of a good or service
at a low price suppliers are unable to proved much product because they’re unable to over their cost
At a low price supplies are unwilling to provide much product because their?
Not going to make enough profit
At a higher price supplies make a lot more….
Profit
Suppliers are very concerned by profitability which means
Suppliers care a lot about making a good profit
Demand Factors: Income
The money or compensation that an individual or household earns over a specified period
Demand Factors: Consumer Preference / taste
Attutides or opinions that consumers have about difference goods or services
Demand Factors: Expectations of future prices
Consumer beliefs about weather prices for a good or services will be higher or lower in the future
Supply Factors: Availability of resources
Weather conditions & natural disasters
Supply Factors: Cost Price of the Inputs used
Changes in tax rates
Supply Factors: Efficiency of reasoruces
Increase new production methods to reduce the amount of waste
