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Economics 1.1.1-1.3
Economics- Edexcel 1.1.1-1.1.3
| Term | Definition |
|---|---|
| economics | the study of how resources are allocated and the decisions made by economic agents |
| model | a simplified representation of economic processes that are used to gain understanding of a theory |
| assumptions | initial or prior conditions made before a micro or macroeconomic analysis is built. |
| assumptions are used for | simplification of a theoretical idea or an economic relationship |
| ceteris paribus | all other influencing factors are held constant |
| ceteris paribus assumption | economists isolate the relationship between two variables by assuming ceteris paribus |
| positive statements | objective statements that can be tested, amended or rejected by referring to the available evidence- often involve cause-and-effect theories |
| positive economics | deals with objective explanation and the testing/rejecting of theories |
| normative statements | subjective statements that carry value judgements |
| value judgements | a view of the rightness or wrongness of something, based on personal view |
| microeconomics | the economics of everyday life(small businesses and households) |
| 3 things each society must decide | what goods and services to provide, how best to produce goods and services, and who best to receive the goods and services |
| scarcity | a finite amount and quantity |
| infinite | a never ending amount |
| opportunity cost | the benefits forgone of the next best conclusion (the cost of missing out on the next best alternative) |
| choice | involves the alternative uses of scarce resources |
| basic economic problem | resources have to be allocated between competing uses because wants are infinite whilst resources are scarce |
| maximum utility | individuals and firms seek to get the highest satisfaction from their economic decision(the best for you out of the money) |
| real incomes | income after the effects of inflation are accounted for |
| disposable incomes | amount of money available after tax |
| the 4 factors of production | capital, entrepreneurship, land, labour |
| land (natural capital) | the stock of natural factor resources available for production |
| labour | the quantity and quality of the human input available for the production process |
| capital | man-made goods used to create other products or perform a service |
| enterprise | entrepreneurs organise inputs and take risks when seeking to exploit market opportunities |
| automation | a production technique that uses capital machinery and harnesses new technologies to replace or enhance human labour |
| capital-labour substitution | replacing labour with technology |
| non-renewable resources | a natural substance that is not replenished with the speed at which it is consumed |
| renewable resources | resources that continue to exist despite being consumed or can replenish themselves over a period of time even as they are used |
| opportunity cost | the cost of a choice measured by the next best alternative foregone(the cost of missing out on the next best choice) |
| barter | the practice of exchanging one good or service for another without using money |
| constraints | limits to what we can afford to consume(we must operate within a budget and therefore must make choice from those sets that are feasible/affordable) |
| economic agent | a participant in an economic system(e.g. consumer, business, government) |
| factor incomes | the rewards to factors of production: labour- wages and salaries, land- rent, capital- interest, enterprise- profit |
| dividends | a sum of money paid regularly by a company to its shareholders out of its profits |
| rationing | a way of allocating scarce goods and services when market demand out-weighs the available supply |
| ways of rationing scarce resources | by market price, by consumer income, by assessment of need, by household postcode, by education level, by age, by gender, by nationality |
| capital goods | goods that are used to make consumer goods and services |
| consumer goods | goods and services which satisfy our needs and wants directly |
| consumer durables | products that provide a steady flow of satisfaction/utility over their working life |
| consumer non-durables | products that are used up in the act of consumption |
| consumer services | an act, e.g. a hair cut or ticket to a show |
| types of consumer goods | durables, non-durables, services |
| free goods | do not use up any factor goods when supplied and have a zero opportunity cost |
| economic system | a network of organisations used to resolve the problem of what, how much, how and for whom to produce |
| free market | markets allocate resources; driven by the profit motive; limited role for the state; private sector dominates |
| mixed economy | mix of state and private ownership; government intervention in markets; mix will vary from country to country- e.g. UK and most other countries |
| command economy | most resources are state owned; planning allocates resources; little role for market prices- e.g. North Korea or Cuba |
| state owned industries | businesses wholly or part state-owned- e.g. royal bank of Scotland, network rail |
| welfare state | broad range of welfare benefits; universal and means-tested |
| government spending on public services | spending on education and health; capital spending on infrastructure |
Created by:
jessharris
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