Micro specification Flashcards
Economic problem
Unlimited human wants but limited resources.
Scarcity
Society has insufficient productive resources to fulfill all human wants and needs.
Economic activity
The process of combining resources to add value and produce goods and services demanded by consumers.
Factors of production
Land, Labour, Capital and Enterprise.
Specialisation
The concentration of an individual, firm, region or country on a narrow range of tasks or goods and services.
Main advantages of specialisation
Increases in productivity leading to lower costs per unit.
Further improvements in skill level leading to higher quality.
Main disadvantages of specialisation
Factor immobility should the pattern for demand change.
Boredom and monotony for workers.
Opportunity cost
The cost of missing out on the next best alternative.
Product possibility curve
Shows the maximum combination of two goods and services that can be produced in an economy where all resources are fully employed.
Market
Any interaction between buyers and sellers for the exchange of goods and services.
Demand
The quantity of a good or service that consumers are willing and able to purchase at a given market price over a period of time.
Determinants of demand
Price of the good or service The price of substitutes The price of compliments Consumers' disposable income and wealth Tastes and preferences (all other factors that could influence demand.
Substitutes (determinant of demand)
A substitute good or service is one that you may purchase instead of another good or service depending on the price. Increase in demand for one would decrease demand for the other. E.G Coke & Pepsi
Complimentary goods or services
Goods or services that are often bought alongside another good or service, an increase in the demand for one would cause an increase in demand for the other.
Disposable income
The income that consumers are left with after taxes have been accounted for.
