Flashcards: Economics

1. Individuals or households

2. Firms

3. The government

1. What to produce?

2. How to produce it?

3. For whom to produce?

The economic activity of private individuals or firms.

The private sector's main aim is to earn profit for its owners.

The economic activity directly involving the government, such as the provision of state education and healthcare services.

The public sector's main aim is to provide a service.

Physical items that can be produced, bought and sold.

Non-physical items that can be provided by firms and governments and paid for by customers.

The essential goods and services required for human survival.ee

Goods and services that are not necessary for survival but are demanded by economic agents to fulfil their desires.

Goods which are limited in supply.

Goods which are unlimited in supply, such as air and seawater. Hence there is no opportunity cost in terms of their output and consumption.

The study of how resources are allocated to satisfy the unlimited needs and wants of individuals, governments and firms in an economy.

It is concerned with how to best allocate scarce resources in order to satisfy people's unlimited needs and wants.

1. Land

2. Labour

3. Capital

4. Enterprise

The natural resources required in the production process. The reward for land is rent.

The human resources required in the production process. The reward for labour are wages and salaries.

The manufactured resources required in the production process. The reward for capital is interest.

The skills a business person requires to combine and manage the other three factors of production successfully. The reward for enterprise is profit.

The extent to which labour is willing and able to move to different locations for employment purposes.

The extent to which labour is able to move between jobs.

The cost of the next best opportunity forgone when making a decision.

It represents the maximum combination of goods and services which can be produced in an economy.

It represents a decrease in the productive capacity of the economy

The study of particular markets and sections of the economy rather than the economy as a whole.

The study of economic behaviour and decision making in the whole economy rather than individual markets.

Marketing

Income

Substitutes

Complements

Production costs

Weather ICT (technology)

Taxes

Subsidies

The method of allocating scarce resources through the market forces of demand and supply.

When the demand of a product matches the supply, so there is no excess demand (shortage) or excess supply (surplus).

When the price for a product is too high (resulting a surplus) or too low (resulting a shortage).

The system of relying on the market forces of demand and supply to allocate resources.

The willingness and ability of consumers to pay at a given price for a good or service.

The inverse relationship between the price of a good or service and the quantity demanded.

The willingness and ability of suppliers to provide goods and services at given price levels.

The positive relationship between price and quantity supplied of a product.

The sum of money received from the sale of a good or service. Formula:

Price x Quantity demanded

The amount of money a business receives in excess of its expenses.Formula:

Total Revenue - Total Costs

This economic system relies on the market forces of demand and supply to allocate resources efficiently with minimal government intervention.

This economic system relies on the government allocating resources.

This economic system is a combination of the planned and market economy system, with some resources being owned and controlled by private individuals and firms and some resources being owned and controlled by the government.

1. Efficiency - competition

2. Freedom of choice3. Incentives - profit motives

1. Income and wealth inequalities2. Environmental issues3. Social hardship4. Wasteful competition

The way an economy is organized in terms of how it best allocates scarce resources.

When the market forces of demand and supply are unsuccessful in allocating resources efficiently and cause external costs or external benefits.

The actual costs of production and consumption by a firm, individual or government.

The negative side-effects of production or consumption incurred by third parties for which no compensation is paid.

The true costs of consumption or production to society as a whole.

The benefits of production and consumption experienced by a firm, individual or government.

The positive side-effects of production and consumption experienced by third parties for which no money is paid by the beneficiary.

The true benefits of consumption or production.

Goods and services that are non-excludable and non-rivalrous. These are a cause of market failure as there is a lack of profit motive to produce them.

Goods and services which when consumed create positive spillover effects in an economy.

Goods and services which when consumed cause negative spillover effects in an economy.

This occurs when the government sets the price under the market equilibrium to encourage consumption.

This occurs when the government sets the price above the market equilibrium in order to encourage output of a good or service.

The transfer of ownership of assets from the public sector to the private sector.

The purchase of private sector assets by the government.

Any commodity that can be used as a medium of exchange and is widely accepted for the purchase of goods and services.

1. Medium of exchange

2. Unit of account

3. Store of value

4. Standard of deferred payment

1. Durability

2. Divisibility

3. Portability

4. Acceptability

5. Scarcity

6. Stability of value

7. Uniformity

The act of swapping items in exchange for other items.

1. Requires a double coincidence of wants

2. It is hard to borrow in a bartering system

3. It is hard to get the precise value of products

4. It is hard to keep track: who owns what and who owes what

The monetary authority that oversees and manages the economy's money supply and the banking system.

A retail bank that provides financial services to its customers and acts as an intermediary linking savers with borrowers.