T1 - 1.1 Nature of Economics Flashcards
What are goods?
A tangible item that can be bought, sold and lent.
What are services?
Non tangible items that provide a action of sort. For example - a train journey.
What is Elasticity?
a change in behaviour based on a change in price/income
What is a model?
A model is a theoretical concept that looks at how different variables interact
What is a subsidy?
Alternative products offered at a lower price
What is outsourcing?
getting labour from abroad
What is ‘Ceteris paribus’
‘All other factors remain the same.’
What are complementary goods?
Goods that are bought together. When demand falls for one, the demand falls for the other too. E.g. toothbrush and toothpaste
What is a Sunk Cost?
Money that is wasted
What is opportunity cost?
The cost of a foregone opportunity
What is a positive statement?
A statement that can be proven using facts - objective
What is a normative statement?
A statement that is based on judgement and opinions - subjective
What is the Economic Problem?
There is not enough resources for everyone due to scarcity. So the government can’t produce as much benefit and utility.
What is a government trade off?
E.g. The gov may need to focus on the older population rather than the younger.
What is a business trade off?
E.g. a business may choose to be sustainable rather than maximise profits.
Who are economic agents?
Individuals, firms and governments that partake in economic activity, the demand for and supply of goods and services.
What is a free market?
A market with limited restriction from the government
What is a command economy?
A market that is restricted by the government. E.g. PRNK
What is a mixed economy?
A market with a balance of limited and restricted intervention from the government.
Choice
The ability of a consumer or producer to decide which good, service or resource to purchase or provide from a range of possible options.
What are the 4 factors of Production?
Land, Labour, Capital and Enterprise
What is austerity?
the name used for government fiscal policy which is aimed at reducing a government’s deficit (or borrowing).
What is the production possibility frontier?
The production possibility frontier (PPF) is a curve on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.
E.g. As the output of good X increases that of good Y decreases and vice versa.
What is a capital good?
Goods that produce a stream of income in the future. E.g. machinery
What is a consumption good?
Goods that produce an immediate benefit to the consumer. E.g. a car for personal use
What is a consumer good?
Goods that you derive personal benefit from
What is marginal?
The cost of adding on additional unit
What is a movement?
A change in the combination of outputs due to price
What is a shift?
An Increase/Decrease in the curve caused by FOP
What is structural unemployment?
When the industry becomes obsolete, decline of the sector
What is frictional unemployment?
time between moving jobs or time spent training for a new job
What is cyclical unemployment?
Employment based on the economic cycle. E.g. the airline industry
What is seasonal unemployment?
Employment depending on time of year. E.g. Farmer (Harvest)
Examples of barriers?
Legislation, tariffs, quotas, embargoes ad protectionist measures.
What is specialisation?
The process where a company or firm will focus their labour on a specific type of production.
When does specialisation occur?
When economic units such as individuals, firms, regions or countries concentrate on producing specific goods or services.
What is the division of labour?
Specialised use of workers in an organisation
What is a bottleneck?
A point of congestion in a production system that slows or stops process
What are bond markets?
The collective name given to all trades and issues of debt securities
What are some problems with the division of labour?
- Work can be monotonous
- Leads to issues with the workforce such as a high absenteeism and labour turnover.
What is money?
- a medium of exchange
- a store of value
- a unit of account
- a standard of deferred payment
What are market forces?
SUPPLY and DEMAND
- work together to determine what price and quantity of goods and service are supplied(market mechanism)
What s competitive pricing?
Set the same price as competitors
What is price penetration?
Low price to begin with, then build up the price as you establish a customer base
What is price skimming?
High price of begin with, then reduce the price over time to capture more customers
What is loss leader?
Customer goes to the store for the cheap item and buys more than intended
What is meritocracy?
The best person gets the best job
What is a demerit good?
A good that is deemed to be bad for society but is over provided by the market
