Unit 1-Area of Study 1-Definitions Flashcards
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Economics
Economics is the study of how to use limited resources to help make individuals and society better of in order to improve living standards
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Living Standards
Living standards refer to how well individuals live their daily lives in regard to material and non-material wellbeing
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Microeconomics
Microeconomics regards decision making by individual firms, households and industries
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Macroeconomics
Macroeconomics regards the workings of the economy as a whole, including the general influences on the levels of national spending, production and income
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Needs
Goods and services that are required by individuals or society to survive
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Wants
Goods and services that would make life more enjoyable but which are not essential for an individual or society
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Resources
Resources are the inputs used in the production of goods and services
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Efficiency
Efficiency relates to the level of output per unit of input. Higher efficiency means more production of goods and services is gained from the same or fewer resources
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Productive Capacity
Is the physical limit to a nation’s production of goods and services that results from the availability of resources
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Consumer Sovereignty
Is the ability of the consumer in a competitive market economy to direct or allocate resources
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Economic Choices
Involve decisions made by individuals/firms/governments about which needs and wants to satisfy, and what types of goods and services should be produced and bought
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Economic Growth
Occurs when a nation increases the volume of goods and services produced over a period of time
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GDP
Gross Domestic Product represents the total value of goods and services produced by a country, usually measured over a one year period
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Market Capitalism
Gross Domestic Product represents the total value of goods and services produced by a country, usually measured over a one year period
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Opportunity Cost
Cost of a particular choice or decision is equal to the benefit given up in one area of production,caused by a decision to direct resources into alternative use
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Poverty
Occurs when individuals have insufficient income to purchase basic goods and services and therefore do not enjoy reasonable living standards
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Private Enterprise
Or capitalism dominates in an economic system when individuals own most business and the means of production, rather than having a dominance of state ownership
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Relative Scarcity
Occurs when a nation has limited resources available for the production of goods and services, compared with people’s needs and wants that are virtually unlimited. Despite this, some resources are also relatively scarcer than others and this is reflected in price differences
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Subsidy
Is a cash payment made by the government to encourage those producing and/or consuming particular types of goods and services
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Market Structure
Relates to the type or strength of competition (for example, pure competition versus pure monopoly) found in different types of markets
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Market Power
Exists when a firm has much control or influence in a market (it is a price maker) because it has a monopoly or perhaps is an oligopoly
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Pure Competition
Occurs when there are many producers each selling a homogeneous product or service where there is no product differentiation
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Price Takers
Are firms operating in strongly competitive markets where they have no power to set the prices they receive
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Monopolistic Competition
Exists when there are quite a large number of firms, each producing a common product or service (such as jeans) but the good or service is distinguished by brand names and product differentiation
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International Competitiveness
Relates to whether a business or country is able to sell its goods and services profitably at prices that are below those for similar goods or services abroad
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Material Living Standards
Refer to how well off an individual or society is, when measured in terms of its income, production or consumption levels of goods and services, per person per year
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Demand
Represents the amount of a good or service that consumers are prepared to purchase at a given price
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Law of Demand
States that as the price of a particular good or service rises, the quantity demanded contracts, whereas if the price falls, the quantity demanded expands
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Supply
Represents the amount of a good or service that sellers are prepared to produce or sell at a given price
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Law of Supply
Represents the amount of a good or service that sellers are prepared to produce or sell at a given price
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Equilibrium Price
Unique price for a particular good or service that is determined in a market when the quantity demanded is exactly equal to the quantity supplied
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Relative Prices
Concept that compares the market prices of different products or resources
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Market Failure
Occurs when the free operation of the market system makes decisions that reduce the satisfaction of society’s wants, thereby lowering general living standards and wellbeing
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Oligopoly
Exists when the level of competition is limited because a few large firms control the output of an industry
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Monopoly
Occurs when competition in a particular industry or market is weak, and a single firm controls the output of an entire industry
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Inequality of Income
Is the wide gap between those Australians on high incomes and those on low incomes. Here, the income cake is divided unevenly and there are large differences in living standards
