Topic 2: Understanding the Economy Test Revision Flashcards
Definition of ‘a market’ (1)
The sum total of all the buyers and sellers in the area or region under consideration
Definition of ‘a market’ (2)
An area or arena in which commercial dealings are conducted
Definition of ‘a market’ (3)
A regular gathering of people for the purchase and sale of provisions, livestock, and other commodities
List the first 3 common elements involved in markets…
- They are based on voluntary transactions
- You need to be the difference to get benefit out of a deal
- Draws in labour and resources to where they are needed
Define the ‘production process’…
Economic resources or inputs (composed of natural resources like land, labour and capital equipment) are combined by entrepreneurs to create economic goods and services (also referred to as outputs or products)
Define the ‘division of labour’
The separation of a work process into a number of tasks, with each task performed by a separate person or group of persons
Explain why the ‘division of labour’ is effective and important in the production process for businesses…
It allows people to specialize in particular tasks. This specialization makes workers more efficient, which reduces the total cost of producing goods or providing a service
Define ‘specialization’…
Specialization is a method of production whereby an entity focuses on becoming an expert in the production of a limited scope of goods to gain a greater degree of efficiency
Explain why the ‘specialization’ is effective and important in the production process for businesses…
Specialization leads to quality work. By specializing in one area, an employee can hone their skill, continually improving the quality of their performance
Greater economic efficiency, consumer benefits, and opportunities for growth for competitive sectors
Define ‘perfect competition’…
A market structure of buyers and many sellers, homogenous products, freedom of entry and exit to the market, perfect information and where producers seek to maximise profit whilst consumers seek to maximise utility
Define ‘imperfect competition’…
A market structure that is also highly competitive with many similarities to perfect competition, but products are not homogenous ( i.e. they are differentiated)
Define ‘oligopoly’…
A market where a few (very large) firms tend to dominate the industry in terms of market share and volumes sold and there is limited competition
Define ‘monopoly’…
A market that is dominated by one seller of a product and the product does not have a close substitute
Define ‘imports’…
An import is a good or service bought in one country that was produced in another
Define ‘exports’…
Exports are defined as movable goods produced within the boundaries of one country, which are traded with another country
