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Economics Paper 1 Key Terms > Key Terms > Flashcards

Key Terms Flashcards

1
Q

Basic economic problem

A

Infinite wants while resources are scarce. So choices must be made on how to allocate resources.

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2
Q

Scarcity

A

There are not enough resources to satisfy all wants

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3
Q

Opportunity cost

A

The value of the next best alternative forgone when making a decision

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4
Q

Trade off

A

What is given up when making a choice

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5
Q

Business objectives

A

What a business is trying to achieve (profit, growth,survival, helping the community)

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6
Q

Stakeholder

A

Anyone interested in the activities or success of a business

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7
Q

Corporate Social Responsibility

A

When a firm surpasses minimum legal requirements. (Using recycled packaging)

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8
Q

Entrepreneur

A

Someone who has the skills and traits required for starting a business

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9
Q

Creative destruction

A

When competition is strengthened via innovation

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10
Q

Factors of production

A

The inputs to the production process, CELL

  • Capital : Equipment used in the production process
  • Enterprise : The creative spark that combines the other factors to create output
  • Labour : Human input, the workforce
  • Land : All natural resources
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11
Q

Non-renewable resources

A

Resources which once exploited, cannot be replaced (oil,coal)

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12
Q

Renewable resources

A

Resources which can be continually exploited, because they can be replaced (trees, fish)

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13
Q

Specialisation

A

When workers become specialists at one task. So at a given amount of input, more is produced.

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14
Q

Market

A

A place where buyers and sellers communicate to agree prices for goods and services

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15
Q

Free market economy

A

An economic system which resolves the basic economic problem through the market mechanism (the invisible hand)

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16
Q

Demand

A

The quantity that buyers are willing and able to purchase of a good at any given price over a given time

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17
Q

Consumer surplus

A

The difference between how much buyers are prepared to pay for a good and what they actually pay

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18
Q

Supply

A

The quantity of goods that suppliers are willing and able to sell at any given price over a period of time

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19
Q

Producer surplus

A

The difference between the market price which firms receive and the price at which they are prepared to supply

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20
Q

Complement

A

A good which is purchased with other goods to satisfy a want

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21
Q

Substitute

A

A good which can be replaced by another to satisfy a want

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22
Q

Price inelastic demand

A

Where the P.E.D is less than 0. Demand is less responsive to a change in price

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23
Q

Price elastic demand

A

Where the P.E.D is less than -1. Demand is more responsive to a change in price

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24
Q

Cross elasticity of demand

A

A measure of the responsiveness of quantity demanded on one good to a change in price of another. % change Q demanded / % change price

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25
Q

Income elasticity of demand

A

A measure of the responsiveness of Q demanded to a change in income. % change Q demanded / % change income

26
Q

Inferior good

A

A good where demand falls when income increases

27
Q

Normal good

A

A good where demand increases when income increases

28
Q

Price elasticity of supply

A

A measure of the responsiveness of Q supplied to a change in price. % change Q supplied / % change price

29
Q

Market research

A

the process of finding out what customers want. quantitative (numbers) or qualitative (feelings, emotions).

30
Q

Competition

A

Businesses fighting to supply the same customers as you

31
Q

Market mapping

A

The process of identifying how different brands appeal to different market segments

32
Q

Differentiation

A

The process of making your product different to gain a competitive advantage

33
Q

Adding value

A

How a business persuades the customer to pay more for something than it cost to produce (convenience, quality, good design, branding)

34
Q

Revenue

A

Money received from sales. Price x Quantity = Revenue

35
Q

Fixed costs

A

Costs that do not change in relation to quantity sold (rent)

36
Q

Variable costs

A

Costs that change in proportion to quantity sold (raw materials)

37
Q

Total costs

A

Fixed costs + Variable costs

38
Q

Break even point

A

The Q sold when revenue = total costs

39
Q

Margin of safety

A

The difference between your break-even level of output and your actual level of output.

40
Q

Gross profit

A

Revenue - Variable costs

41
Q

Operating (net) profit

A

Revenue - Total costs

42
Q

Gross profit margin

A

The % of sales revenue left after variable costs (Gross profit / Revenue)x100

43
Q

Operating profit margin

A

The % of sales revenue left after total costs have been paid (Operating profit/Revenue)x100

44
Q

Profit and loss account

A

A document that shows the revenues, costs and profits of a business

45
Q

Cash

A

The money “in hand” at a point in time

46
Q

Cash flow forecast

A

A document predicting how much cash a business will have at a point in time

47
Q

Market failure

A

When there is a misallocation of resources

48
Q

Private cost and benefit

A

The cost or benefit of an activity to an individual or firm

49
Q

Social cost and benefit

A

The cost or benefit of an activity to society

50
Q

Externality

A

Where the actions of an individual or firm have an impact on society that they do not pay for

51
Q

Negative externality in production

A

Where social costs are greater than private costs

52
Q

Negative externality in consumption

A

Where social benefits are lower than private benefits

53
Q

Positive externality in production

A

Where social costs are less than private costs

54
Q

Positive externaility in consumption

A

Where social benefits are greater than private benefits

55
Q

Merit good

A

A good that has positive externalities AND the consumer lacks information about their own private benefits

56
Q

De-merit good

A

A good which has negative externailities AND the consumer lascks information about their own private costs

57
Q

Public good

A

A good that is non-excludable and non-rivalrous

58
Q

Quasi public good

A

A good that does not fully have both characteristics of a public good

59
Q

Free rider

A

A person or organisation which receives benefits that others have paid for without making any contributions themselves

60
Q

Spectrum of competiton

A

Perfect competition through monopoly

61
Q

Perfect competition

A

Many buyers and sellers, product is homogeneous, perfect information, no barriers to entry, perfectly efficient, price takers
Firms are attracted to short run abnormal profit, enter the market freely and drive down the price. In the long run, P=MC and only normal profit is made

62
Q

Imperfect competition

A

Like perfect, but there are only low barriers to entry, knowledge is imperfect,products are heterogeneous,

Economics Paper 1 Key Terms (1 decks)

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