Topic 1: Enterprise & The Economy. Flashcards
Exam Revision.
What is Economics?
Economics is the study of the decisions, outcomes and activities that occur as a result of a scarcity of resources. It is study of how society uses its limited resources to satisfy
unlimited needs and wants.
Economics is all about choices – choices about how resources are used, shared and
consumed – and the consequences of those choices.
Goods.
Goods refer to tangible items that can be used, stored, evaluated, taken home or consumed. E.g. computer, clothing, cars, etc…
Services.
Services are intangible properties where the service receiver does not obtain anything tangible or ownership. E.g. hair cut, consultation with a doctor/lawyer, a plumber fixing your sink, etc…
The Economic Problem (Scarcity).
The basic economic is scarcity, because people have unlimited wants but resources are limited. People have to make choices about what needs and wants are most important to satisfy.
Needs.
Needs are when you require something because it is essential to your survival. Needs are the basics of life we can’t live without. E.g. Food, clothing, water, health care, shelter, etc…
Wants.
Wants are when you have a desire to possess or do something. Wants are items, activities or services that increase you quality of life. E.g. Phones, cars, television, etc…
Natural/Land Resources.
Natural resources are useful raw materials that we get from the Earth. They occur naturally, meaning humans cannot make them. Humans can use and modify natural resources in ways that are beneficial to us. E.g. Forests, water, oceans for fishing, etc…
Labour Resources.
Labour resources describe the human work effort, both physical and mental, used in the production of goods and services. E.g. Carpentry, teaching and flying planes, etc…
Capital Resources.
Capital resources are all equipment (such as machinery, buildings, infrastructure) used by humans labours in the process of production. E.g. Hammers, computers, desks, fences, etc…
Enterprise.
Enterprise is when a person uses their initiative, drive and personal goals to start and maintain a business. E.g. Bill Gates used enterprise to set up Microsoft.
What does Tangible mean?
Tangible is physical items that can be touched.
What are Resources?
Resources are productive inputs that are required by businesses to make goods and services.
Opportunity Cost.
Opportunity cost refers to the value of the lost alternative use to which resources could have been allocated. The benefits foregone that could have been gained if the alternative option was selected. For example, if you had the choice between going to the movies or going to work and you chose the movies, you miss the benefit of the income you could have earned if you had gone to work.
What is a Market?
A market is any situation where potential buyers in contact with potential sellers and there is a means of exchange. A means of exchange is a way of paying for the goods and services that are traded. Markets determine the allocation of resources in order to satisfy the needs and wants of consumers.
The three basic economic questions.
- What will we produce?
- How will we produce it?
- Who will receive the final product?
Price Mechanism.
The price mechanism is the system whereby producers supply and consumers demand interact in the market place to set prices for goods and services.
The Law of Demand. (Consumer)
The law of demand is as the price of an item decreases the quantity of that item that will be demanded by the market will increase. As the price increases consumers will be less willing and able to pay and demand will decrease.
Demand Factors - Consumer Preferences and Taste.
Personal preferences of a consumer will influence the consumer to purchase a product. Different consumers have different preferences, this may include the colour, size or brand of a product.
Demand Factors - Income.
A consumer’s income will influence their willingness and ability to purchase goods and services. The higher a consumer’s income the more willing and able a consumer will be to purchase it.
Complementary and Substitute Products.
Complementary products are those goods or services that can only be used alongside the primary product sold.
