ECONOMICS - Economic groups

• What is specialisation?


  The process by which individuals, firms, regions and whole economies concentrate on producing those products they are best at producing
• What is division of labour?

  The system whereby workers concentrate on performing a few tasks. Workers are likely to become more efficient and also time is not lost moving from one job to another. This is a type of specialisation
• What are the main economic groups?


  consumer (who wants to maximise satisfaction)

  producer (wants to maximise profits)

  governement (wants to maximise citizen welfare)
• What is a market?


  A market is where buyers and sellers meet to buy and sell goods and services
• What is a market economy and what is a command economy?

  A market economy is where most of the goods and services are provided by the market

  A command economy is where the goods and services are provided by the government
• What is exchange?


  The giving up of something that the individual or firm has in return for something they wish to have but do not possess.
• How does specialisation encourage exchange?

  Individuals and businesses can focus on what they are best at, leading to more output and greater efficiency
• How do econonmists make decisions on how to best allocate resources?

  An economic choice is an option for the use of selected scarce resource. They think about economic, social, and environmental sustainability.
• What are the advantages of specialisation to the firm?

  • workers become quicker at producing goods and are more efficient
  • Production becomes cheaper
  • Production levels are increased and the standard should be higher
  • Each worker can concentrate on what they're good at. Building expertise = more output
  • Output increases and so does profit
• Specialisation advantages for the worker?

  • Experience leads to higher quality so paid more
  • Higher demand leads to higher wage
• Specialisation disadvantages for the firm?

  • Monotony leads to high staff turnover (costs more money)
  • Machines can eventually take over from labour - this can lead to dependency
  • Training costs/Recruitment
  • Workers can ask for higher wages
  • People might not eventually want your product
  • As output increases, costs will rise as resources become harder to get.
• Specialisation disadvantages for the worker?

  • Monotony leads to impact on physical and mental health
  • Over reliance on workers as they have specialist skills leading to high expectations
  • Become unemployed easily e.g till people in supermarkets
• What is the basic economic problem?


  Scarce resources and infinite wants
• How do we allocate scarce resources?


  Making a choice on how to allocate resources involves us answering 3 questions:

  1. What to produce?
  2. How to produce it?
  3. Whom should it be produced for?
• What are the factors of production?

  1. Capital : Goods that are used to produce other goods and services .eg. machinery, factory, buildings, computers. REWARD=INTEREST
  2. Enterprise : Having ideas and taking risks. Organises the other factors of production. REWARD=PROFIT
  3. Land : The land itself and the natural resources on and below the land eg. oil, coal, trees. REWARD=RENT
  4. Labour : The human input into the production process. Each person has different skills/qualifications, human capital. REWARD = WAGE
• What is opportunity cost?

  The next best alternative given up when making a decision (NBA)

  Example: I'm picking between strawberry laces and chocolate. I pick chocolate so the laces are opportunity cost
• What is the difference between needs and wants?

  Need = Something a consumer has to have in order to survive

  Want = Something a consumer would like to have but which is not essential for survival
• What is a factor and product market?

  Factor market is a market in which the factors of production are bought and sold.

  Product market is a market in which the final goods or services are offered to consumers, businesses and the public sector
• What is derived demand?

  Factor and product market are interdependent because if you demand a good or service, then producers need to demand the factors of production in order to produce those goods or services
• What sector of the market adds value and how?


  The service (tertiary) sector adds more value to the economy through goods (tangible product) and services (intangible product)
• Why do economists love specialisation?


  Resources are used more efficiently and with scarce resources, that's a good thing. Helps ease the economic problem.
• What is the role of markets?


  PRIMARY SECTOR: The first stage of production where raw materials are extracted.

  SECONDARY SECTOR: Raw materials are manufactured and processed into the final good

  TERTIARY SECTOR: This is the provision of services of all kinds to businesses and the general public