economics

• Needs


  Something essential to survival - food, water, warmth, clothing and shelter
• Wants


  Something you would like to have, but is not essential to survival
• Resources


  Something used to produce output
• Productivity


  Output per worker per period of time
• Factors of production


  The resources we have available to produce goods and services - Capital, Enterprise, Land and Labour (Production Cell)
• Primary Sector


  Where the extraction of raw materials takes place - Mining, farming, fishing, oil extraction, forestry, quarrying
• Secondary Sector


  Where raw materials are manufactured into goods - Car manufacturing, furniture manufacturing, manufacture of electronic goods, for example computers, mobile phones
• Tertiary Sector


  Where services are applied - Banking, tourism, education, public transport, entertainment, health services, insurance, advertising
• Opportunity Cost


  The next best alternative foregone when making a choice - what we give up when we make a choice
• Market


  Where buyers and sellers meet to exchange goods and services. This does not have to mean a face-to-face meeting
• Market Economy


  Where all resources are allocated by private individuals and groups
• Planned Economy


  Where all resources are allocated by the government
• Mixed Economy


  Where some resources are allocated by the government, and other resources are allocated by private individuals and groups
• Public Sector


  The government sector of the economy, where organisations are owned and run by the government
• Private Sector


  The sector of the economy where firms are owned and run by private individuals and groups - their main aim is profit maximisation
• Surplus


  when more is produced than is required. It can be exchanged for money or other goods and services
• Competitive market

  a market situation in which there are a large number of buyers (demand) and sellers (supply)
• Monopoly


  A situation where there is only one firm selling in a market. For example, before 2006 Royal Mail was one, being the only firm to provide the service of letter delivery
• Monopoly Power


  When a firm has more than 25% of the market share. Tesco has a legal one in the supermarket industry, it holds approximately 31% of the market share. This means that 31% of all supermarket sales happen at Tesco.
• Demand

  the quantity of buyers are willing and able to buy at a given price in a given period of time
• Effective Demand


  Solid, or real Demand
• Contraction of demand

  the fall in the quantity demanded due to a rise in price
• Extension of demand

  the increase in quantity demanded due to a fall in price
• Inferior Goods

  goods for which the demand falls when income rises.
• Perfectly Inelastic Demand

  The quantity demanded remains the same although the price changes, i.e. demand in completely unresponsive to a change in price, zero
• Inelastic demand

  The quantity demanded changes at a lesser rate than price, less than 1
• Unit Elastic Demand

  The quantity demanded changes at the same rate as price, 1
• Elastic demand

  The quantity demanded changes at a greater rate than price, greater than 1
• Perfectly elastic demand


  Any quantity is demanded at a given price, Infinity
• Total revenue

  The amount of money a firm receives when selling its product. (At this stage we do not consider total costs.) equal to price times quantity sold
• Supply

  the quantity a producer is willing and able to produce at a given price in a given period
• Perfectly Inelastic Supply


  The quantity supplied remains the same as the price changes, i.e. supply is completely unresponsive to a change in price, zero
• Inelastic Supply

  The quantity supplied changes at a lesser rate than price, less than one
• Unit elastic Supply


  The quantity supplied changes at the same rate as the price, 1
• Elastic Supply


  The quantity supplied changes at a greater rate than price greater than one
• Perfectly elastic supply


  Any quantity is supplied at a given price
• Equilibrium

  the point where demand and supply meet
• Output


  The number of goods and services produced by a firm
• Fixed costs


  costs that do not vary with output (e.g. rent)
• Variable Costs


  costs that vary directly with output (e.g. raw materials)