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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
Income elasticity of demand
A measure of the responsiveness of Q demanded to a change in income. % change Q demanded / % change income
26
Inferior good
A good where demand falls when income increases
27
Normal good
A good where demand increases when income increases
28
Price elasticity of supply
A measure of the responsiveness of Q supplied to a change in price. % change Q supplied / % change price
29
Market research
the process of finding out what customers want. quantitative (numbers) or qualitative (feelings, emotions).
30
Competition
Businesses fighting to supply the same customers as you
31
Market mapping
The process of identifying how different brands appeal to different market segments
32
Differentiation
The process of making your product different to gain a competitive advantage
33
Adding value
How a business persuades the customer to pay more for something than it cost to produce (convenience, quality, good design, branding)
34
Revenue
Money received from sales. Price x Quantity = Revenue
35
Fixed costs
Costs that do not change in relation to quantity sold (rent)
36
Variable costs
Costs that change in proportion to quantity sold (raw materials)
37
Total costs
Fixed costs + Variable costs
38
Break even point
The Q sold when revenue = total costs
39
Margin of safety
The difference between your break-even level of output and your actual level of output.
40
Gross profit
Revenue - Variable costs
41
Operating (net) profit
Revenue - Total costs
42
Gross profit margin
The % of sales revenue left after variable costs (Gross profit / Revenue)x100
43
Operating profit margin
The % of sales revenue left after total costs have been paid (Operating profit/Revenue)x100
44
Profit and loss account
A document that shows the revenues, costs and profits of a business
45
Cash
The money "in hand" at a point in time
46
Cash flow forecast
A document predicting how much cash a business will have at a point in time
47
Market failure
When there is a misallocation of resources
48
Private cost and benefit
The cost or benefit of an activity to an individual or firm
49
Social cost and benefit
The cost or benefit of an activity to society
50
Externality
Where the actions of an individual or firm have an impact on society that they do not pay for
51
Negative externality in production
Where social costs are greater than private costs
52
Negative externality in consumption
Where social benefits are lower than private benefits
53
Positive externality in production
Where social costs are less than private costs
54
Positive externaility in consumption
Where social benefits are greater than private benefits
55
Merit good
A good that has positive externalities AND the consumer lacks information about their own private benefits
56
De-merit good
A good which has negative externailities AND the consumer lascks information about their own private costs
57
Public good
A good that is non-excludable and non-rivalrous
58
Quasi public good
A good that does not fully have both characteristics of a public good
59
Free rider
A person or organisation which receives benefits that others have paid for without making any contributions themselves
60
Spectrum of competiton
Perfect competition through monopoly
61
Perfect competition
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
Imperfect competition
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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