Studied by 8 peopleScarcity
A situation where there is not enough to staisfy everyone's wants.
The econoomic problem
Unlimited wants exceed scarce resources.
Factors of production
The economic resources of captial, enterprise, labour and land.
Occupationally mobile
Capable of changing use.
Geographically immobile
Incapable of moving from one location to another location.
Capital
Human-made goods used in production.
Investment
Spending on capital goods.
Productivity
Output per worker per hour.
Enterprise
Risk bearing and decision making in business.
Oppurtunity cost
The best alternative forgone.
Economic good
A product which requires resources to produce it and therefore has an oppirtunity cost.
Free good
A product which does not require any resources to make it and so does not have an opportunity cost.
Production possibility curve
A curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology
Planned economy
An economy where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives.
Market economy
An economy where cosumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned.
Mixed economy
An economy in which both the private and public sectors play an improtant role.
Demand
The willingness and ability to buy a product.
Market demand
Total demand for a product.
Extension in demand
A rise in the quntity demand caused by a fall in the price of the product itself.
Contraction in demand
A fall in the quantity demand caused by a rise in the price of the product itself.
Extension in supply
A rise in the quntity supplied caused by a fall in the price of the product itself.
Contraction in supply
A fall in the quantity supplied caused by a rise in the price of the product itself.
Equilibrium price
The price where demand and supply are equal.
Disequilibrium
A situation where demand and supply are not equal.
Nomal good
A product whose demand increases when income increases and decreases when income falls.
Inferior good
A product whose demand decreases when income increases and increases when income falls.
Substitute
A product that can be used in place of another.
Complement
A product that is used tofether with another product.
Ageing population
An increase in the average age of the population.
Increase in supply
A rise in supply at any given price, causing the supply curve to shift to the right.
Decrease in supply
A fall in supply at any given price, causing the supply curve to shift to the left.
Unit cost
The average cost of prodution per unit produced. It is found by dividing total cost by output.
Improvements in technology
Advances in the quality of captial goods and methods of production.
Tax
A payment to the government.
Indirect taxes
Taxes on goods and services, collected by firms on behalf of the government..
Subsidy
A payment by a government to encourage the production or consumption of a product.
Price elasticity of demand
A measure of the responsiveness of demand to a change in price.
Elastic demand
When demand changes by a greater percentage than the change in price.
Inelastic demand
When demand changes by a smaller percentage than the change in price.
Price elasticity of supply
A measure of the responsiveness of supply to a change in price.
Elastic supply
When supply changes by a greater percentage than the change in price.
Inelastic supply
When supply changes by a smaller percentage than the change in price.
Private costs
Costs borne by those directly consuming or producing a product.
Private benefits
Benefits received by those directly consuming or producing a product.
External costs
The spill-over costs on third parties not directly involved in the consumption and/or production of a product.
External benefiits
The spill-over benefits to third parties not directly involved in the consumption and/or production of a product.
Social costs
The total costs to a society of an economic activity. This includes private and external costs
Social benefits
The total benefits to a society of an economic activity. This includes private and external benefits
Cost benefit analysis
A method of assessing investment projects which takes into account, social costs and benefits.
Specialisation
The concentration on particular products or tasks.
Division of labour
Workers specialising in particular tasks.
Money
An item which is generally acceptable as a means of payment.
Commercial banks
Private sector banks which aim to make a profit by providing a range of banking services.
Central bank
A government owned bank which provides banking services to the government and commercial banks.
Stock exchange
An organisation for the sale and purchase of shares and other securities.
Bull
Someone who buys shares expecting their price to rise.
Bear
Someone who sells shares expecting their price to fall.
Earnings
The total pay received by a worker.
Wage rate
A payment which an employer agrees to pay a worker.
National minimum wage
A minimum rate of wage for an hour's work, fixed by the government for the whole economy.
Wage differential
The difference in wages.
Elasticity of demand for labour
A measure of the responsiveness of demand for labour to a change in the wage rate.
Elasticity of supply of labour
A measure of the responsiveness of the supply of labour to a change in the wage rate.
Trade union
An association which represents the interest of a group of workers.
Collective bargaining
Representatives of workers negotiating with employers' associations.
Wealth
A stock of assets including money held in bank accounts, shares in companies, government bonds, cars and houses.
Disposable income
Income after the deduction of direct taxes.
Consumption
Expenditure by households on consumer goods and income.
Average propensity to consume
The proportion of household disposable income which in spent.
Average propensity to save
The proportion of household disposable income that is saved.
An industry
A group of firms producing the same product.
Limited liability
Shareholders' liability for the business is limited to the value of the shares they have agreed to buy.
Sole proprietor
A business owned by one person.
Partnership
A business organisation of two or more people who are personally responsible for its debts and share its profits.
Private limited company
A business organisation with limited liability which can only sell its shares with the approval of existing shareholders.
Public limited company
A business organisation with limited liability which sells its shares to the general public.
Co-operative
A firm that exists for the benefits of its members.
Public corporation
A business organisation owned by the government which is designed to act in the public interest.
Privatisation
The sale of public sector assets to the private sector.
Corporation tax
A tax on the profits of a company.
Fixed costs
Costs which do not change with output in the short run.
Varaible costs
Costs that change with output.
Long run
The time period when all factors of produciton can be changed and all costs are variable.
Profit maximisation
Making as much profits as possible.
Profit satisficing
Sacrificing some profit to achieve other goals.
Perfect competition
A market structure with the highest level of competition. There are no barries or restriction on the entry into and exit from the market.
Normal profit
The minimum level of profit required to keep a firm in the industry in the long run.
Monopoly
A market with a single supplier of a product.
Horizontal integration
The merger of firms producing the same product and at the some stage of production.
Rationlisation
Eliminating unnecessary equipment and plant to make a firm more efficient.
Vertical integration
The merger of one firm with another firm that either provides an outlet for its products or supplies it with raw materials, components or the products it sells.
Conglomerate merger
A merger between firms producing different products.
Internal economies of scale
Lower long run average costs resulting from a firm growing in size.
External economies of scale
Lower long run average costs resulting from an industry growing in size.
Internal diseconomies of scale
Higher long run average costs arising from a firm growing too large.
External diseconomies of scale
Higher long run average costs arising from an industry growing too large.
Merit good
A product which the government considers as beneficial and which will be under-consumed if left market forces.
Public good
A product which is non-rival and non-excluable and hence needs to be financed by taxation.
Umemployment rate
The percentage of the labour force who are willing and able to work but are without jobs.
Balance of payments
A record of a country's economic transactions with other countries.
Note
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