Eco Definitions Flashcards
economic problem
when unlimted wants exceed limited resources
Land
Natural resources used up in production
Labour
Physical or mental effort put in by an individual to produce a good or provide a service.
Capital
Man-made resources that help produce goods and services
Enterprise
Ability to bring all these factors together to set up a firm. People who do this are called entrepreneurs.
Land
Natural resources used up in production
Labour
Physical or mental effort put in by an individual to produce a good or provide a service.
Capital
Man-made resources that help produce goods and services
Enterprise
Ability to bring all these factors together to set up a firm. People who do this are called entrepreneurs.
Wages
The reward for labour - People supply their labour to firms in return for a payment in wages. Could be paid per hour of labour, week, etc or for every task they complete.
Rent
The reward for land - Owners of the land require the payment of rent to supply these resources to firms.
Interest
Interest is paid to the people and organizations that supply or invest capital in firms.
Profit (reward)
The reward for entrepreneurs for successfully organizing production in a firm.
Opportunity cost
The next best alternative foregone
PPC
The maximum combination of any two goods that an economy can produce with all available resources, assuming a fixed level of resources and technology
Demand
The want and willingness of a consumer to buy goods and services
Non price determinants of demand
Income
income tax
Change in preferences
Price of compliment goods
Price of substitute goods
Advertisements
ITS CAP
Supply
The amount of a good or service firms or producers are willing to produce and sell at different prices
Market equilibrium
When quantity demanded is equal to quantity supplied and the market is cleared
Market disequilibrium
When quantity demanded is not equal to quantity supplied and there is either a surplus or shortage of supply
PED
Responsiveness of consumers demand to the change in price of a good or service
Determinants of PED
SPLAT
Substitute
Proportion of income
Luxury or necessity
Addictive
Time
What is PES
Responsiveness of quantity supplied to a change in price
Determinants of PES
Time period required to adjust the scale of production
Spare production capabilities and capacity
Mobility of factor of production
The availability of spare stock.
ST/TM
What is a market economic system
Actions of individual consumers, households and firms influence the allocation of resources. No public sector or govt. intervention
When does a market failure occur
When free markets fail to produce outcomes in terms of prices and quantities that are socially or economically desirable.
What is price ceiling
A maximum price set to sell a commodity set by the govt
Quantity demanded > quantity supplied
What is price floor
Minimum price to sell a commodity set by the govt
Quantity supplied > quantity demanded
What are indirect taxes
taxes on expenditure to make the good/service more expensive
What are subsidies
Sum of money given by the govt to producers based on certain conditions.
How can govt corr ‘some firms may exploit their consumers and employees’
Regulate behavior of large powerful firms
nationalization
Employment laws
Legal minimum wage
What is a trade union
An organization which aims to protect the interests of its members
What is a budget
the relationship between government revenue and government spending
What is fiscal policy
Fiscal policy is a government policy which adjusts government spending and taxation to influence the economy.
What is the definition of monetary policy
Decisions on the money supply, the rate of interest and the exchange rate taken to influence aggregate demand
What are supply side policies
Supply side policies are microeconomic policies aimed at increasing supply and productivity in the economy
What is the definition of economic growth
The increase in a country’s real GDP or national income over a period of time
money supply
total value of money present in an economy at a point in time
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