Economics Flashcards
Needs
Something essential that a person needs in order to survive
Basic food, clothes and water, shelter
Want
Items a person doesn’t need to have in order to survive
The Factors of Production
The resources that are needed to produce a product or provide a service
Land, labour, capital, enterprise
Land
Anything provided by nature that helps to produce goods and services
Reward is rent
Labour
Any human effort that helps produce goods and services
Reward is wages
Capital
Anything made by humans that helps to produce other goods and services
Reward is interest
Enterprise
The special form of human activity that organises the other factors of production and bears the risk involved in production
Reward is profit
Economics
The study of how we make the best possible use of scarce resources in order to satisfy the requirements of as many people as possible
Mixed economic system
Most of the economic decisions to be made by the private sector, but the government intervenes to ensure the supply of essential goods to everybody
E.g. Ireland
Financial cost
The amount of money paid for something
Opportunity cost
The item that is not chosen when deciding between two or more actions
Inflation
An increase in the general level of the price of goods and services over a period of time
Increase in prices
———————— X 100
Prices in Year 1
Official measure of Inflation
Consumer Price Index
CPI
Effects of inflation
- The cost of living increases
- There is more demand for an increase in wages
- It discourages saving
- The price of exporting increases
- Irish people buy cheaper imports
Economic growth
When more goods are produced in a country one year that were produced the previous year
Official measure of economic growth in Ireland
GNP (Gross National Product)
GDP (Gross Domestic Product)
Negative Economic Growth
When less goods are produced in a country than were produced the previous year
Benefits of economic growth
- Unemployment rate decreases
- Tax revenue increases
- Social benefit decreases
- Increase in the standard of living
Department that prepares the national budget
Department of Finance
Economic Recession
When less goods and services are produced in an economy two consecutive quarters
Current expenditure
Spending on day-to-day items
Social welfare payments, debt servicing, wages for government employees
Capital expenditure
Spending on items that last long (durable items)
Building new schools/hospitals/roads
Capital income examples
Sale of semi-state bodies. e.g. Aer Lingus
EU grants
Borrowings
Causes of inflation
- The cost of indirect tax goes up e.g. VAT
- The demand for goods is greater than the supply of goods
- The cost of importing goods increases
- An increase in the cost of producing goods
