| goods | things that are produced in order to be sold |
| finite | having an end or a limit |
| the 5 basic needs | water, food, warmth, shelter, clothing |
| factors of production | land, labour, capital, enterprise |
| basic economic problem | recources are scarce or finite but peoples wants are infinite |
| scarce resources | ammount of recources available when supply is limited |
| 3 questions economic systems aim to answer | what to produce, how to produce, for whom to produce |
| opportunity cost | cost of the next best alternative given up (when making a choice) |
| capital goods | those purchased by firms and used to produce other goods such as factories, machinery, tools and equipment |
| consumer goods | those purchased by households such as food, cars or furniture |
| what does the production posiblilities curve show | shows the diferent combinations of two goods an economy can produce if all recources are used up |
| economic growth | increase in the level of output by a nation |
| causes for economic growth | new technology, improved efficiency, education, training, new resources |
| consumers aim to maximise | benefit |
| producers aim to maximise | profit |
| why consumers might not always maximise benefit | difficulty calculating benefits, buying habits, influence by others |
| why producers might not always maximise profit | preformance of employees, alternative objectives, charities, social enterprises |
| demand curve | line drawn on a graph that shows how much of a good will be bought at different prices |
| increase in demand will cause the demand curve to shift | right |
| decrease in demand will cause the demand curve to shift | left |
| factors that may shift the demand curve | advertising, income, fashion and tastes, price of substitues, price of compliments, demographic changes |
| inferior goods | goods for which demand will fall if income rises, or rise if income falls |
| normal goods | goods for which demand will increase if income increases or fall if income falls |
| substitute goods | goods bought as an alternative to another but preform the same function |
| complimentary goods | goods purchased together because they are consumed or used together |
| supply | ammount that producers are willing to offer for sale at different prices in a given period of time |
| supply curve | line drawn on a graph which shows how much of a good sellers are willing to supply at different prices |
| proportionate relationship | when the price goes upthe quantity supplied also goes up and when the price goes down the quantity supplied goes down |
| if the quantity supplied falls the line will shift to the | left |
| if the quantity supplied rises the line will shift to the | right |
| factors that may shift the supply curve | production cost, indirect taxes, subsidies, new technology, natural factors |
| equilibrium price | price at which supply and demand are equal |
| total revenue | ammount of money generated from the sale of goods calculated by multiplying price by quantity |
| shifts in demand | if demand increases price will rise. this causes a shift in the demand curve to the right. this changes the equilibrium because now supply and demand are now equal but at a different point
if demand were to fall the oposite would happen. the demand curve would shift to the left and the price would fall. |
| shifts in supply | if supply increases the price will fall. this changed the equillirbium because supply and demand are now equal but at a different point.
if supply were to fall. the opposite would happen. the supply curve would shift to the left and price would rise. |
| If theres exces demand producers could | Raise the price |
| if theres excess supply producers could | lower the price |
| factors of production | recources used to produce goods and services |
| production | process that involves converting recources into goods or services |
| describe land | businesses need land to build their premises
Land also includes natural recources
Some of the land recourses are non renewable once they have been used they cannot be replaced
some of the land recources are renewable they are replaced by nature |
| describe labour | Labour is the workforce in the economy
The value of an individual worker to a buisness is their human capital
It is possible to increase the value of human capital through training and education this will help make workers more productive |
| describe capital | Capital is often said to be artificial recource because it is made by Labour.
Theres 2 types of capital
Working capital = resources used up in production such as raw materials and components
Fixed capital = stock of man made recources such as machines and tools used to help make goods and services. It is fixed because it will not be converted into a final product |
| define enterprise | Entrepreneur = individuals who organise the other factors of production and risk their own money in a buisness venture
Entrepreneurs are responsible for setting up a buisness |
| what do entrepreneurs do | they come up with buisness ideas
The are buisness owners
They are risk takers
They are responsible for organising the factors of production |
| capital intensive | production that relies more heavily on machinery relative to labour |
| Labour intensive | Production that relies more heavily on labour relative to machinery |
| primary sector | Production involving the extraction of raw materials from the earth. Eg. Fishing, mining |
| secondary sector | production involving the processing of raw materials into finished and semi finished good. Eg. Car production |
| tertiary sector | production of services in the economy. Eg. Transport |
| define GDP | gross domestic product reprisents the total monetary value of all final goods and services produced within a country during a period of time. Its used to measure economic activity. |
