OCR GCSE Economics Micro Definitions List

• Basic economic problem

  the gap between scarce resources and the unlimited wants for them
• Market economy

  the forces of supply and demand allocate resources via the price mechanism. All resources are privately owned and there is no government intervention
• Planned economy


  the government allocates all resources via the price mechanism. All resources are owned by the government and they control prices
• Mixed economy


  some resources are owned and allocated by private individuals and the government owns and allocates others
• 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
• Factors of production


  resources used in the production process
• Capital


  goods used to produce other goods and services
• Enterprise


  having ideas and taking risk, with a reward of profit
• Labour


  human input into the production process
• Land

  physical land itself as well as all the natural resources and raw materials above/below the land which are available for production
• Opportunity cost


  the next best alternative forgone when an economic choice is made
• Economic sustainability


  considers how an economic choice ensures the best and most responsible use of scarce resources so that a firm or economy can keep growing over time
• Social sustainability


  considers the impact of development or growth that promotes an improvement in quality of life, now and into the future
• Environmental sustainability


  considers how an economic choice impacts renewable and non-renewable resources, pollution, climate change and the availability of resources, now and into the future
• Primary sector


  the direct use of natural resources, such as the extraction of basic materials and goods from the land and sea
• Secondary sector


  the conversion of raw materials into goods; it includes all manufacturing and construction activities
• Tertiary sector


  the provision of a service
• Market


  where buyers and sellers meet to exchange goods and services
• Factor market


  where the services of the factors of production are bought and sold
• Product market

  where final goods and services are bought and sold
• Derived demand


  the demand for a factor of production not for itself, but is dependent on the demand for the product it is used to produce
• Specialisation


  the process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing
• Division of labour


  where each worker concentrates on only one small aspect of the production process
• Surplus


  where more is produced than is required
• Absolute advantage


  where a country is able to provide a good or service using fewer resources and at a lower cost than another country
• Demand


  the number of goods and services buyers are willing and able to buy at a given price at a given time
• Supply


  the number of goods and services firms are willing and able to provide at a given price at a given time
• Equilibrium (Market clearing price)


  where demand and supply meet at a given price at a given time
• Consumer sovereignty


  when consumers influence the allocation of resources by producers
• Price


  the sum of money you have to pay for a good or service
• Cost


  how much money it takes a producer to provide a product
• Worth

  how much you value something
• Price elasticity of demand (PED)


  a measure of the responsiveness of the quantity demanded to a change in price of a product
• Price elasticity of supply (PES)


  a measure of the responsiveness of quantity supplied to a change in price of a product
• Competitive market


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


  obstacles that might discourage a firm from entering a market
• Market share


  the proportion of sale that one business has compared to the total sales in the market
• Monopoly (Pure monopoly)


  where there is only one producer or seller of goods in a market
• Monopoly power (Legal monopoly)


  where one firm has a share of 25% of the market or more