Terms in this set (...)

How we use our limited resources to satisfy our unlimited needs and wants
The concept of having limited resources
opportunity cost
The choice of alternative due to scarcity
Something needed to survive
Something that is not needed to survive
Example of needs
Food, water, shelter
Examples of wants
iPhones, cars, holidays
A physical product
Example of a goods
Clothes, groceries
An activity performed for a fee
Example of a service
haircut, car wash
factors of production
What we combine to produce something - Land, Labour, Capital and Enterprise
Natural resources we use to produce something
The human activity of producing good and services
The equipment and tools used to make something
Organises the factors of production to produce goods and services
The public who buys goods and services (us)
The organisation of people to make and sell goods and services
A place where consumers and producers interact
market forces
Economic aspects that influence price
Law of Demand
as price increases, quantity demanded decreases
Law of supply
as price increases, quantity supplied increases
Graph of demand and supply (x & y axis)
Quantity = x and price = y
graph - demand
If demand is greater, d1 is on the right, if demand is lower, d1 is on the left
Graph - supply
If supply is greater, s1 is on the left, if supply is lower, s1 is on the right
Where quantity demand = quantity supplied
A situation where demand is greater than supply
Where supply is greater than demand
Non price factors of demand - substitute goods
A similar alternative, eg nike or adidas
Non price factor of demand - complementary goods
A associated product eg a bike and a associated good would be a helmet
Non price factor of demand - tastes and preferences
Trends in consumers eg music, fashion and technology
Non price factors of demand - Advertising
Make people want to buy things eg new iPhones
Non price factors of demand - demographics
the structure and composition of the population, eg age & gender
Non price factors of supply - number of suppliers
As the number in the business market increases, so does supply - eg - Uber, taxi, netflix
Non price factors of supply - weather
Weather and natural disaster can decrease supply - eg - earthquakes and cyclones
Non price factors of supply - cost of production
The cost of land labour, capital and enterprise - eg - cost of land, or increase of wages
Non price factors of supply - technology
Increase of Production = decrease of cost - eg - cars, clothes
What to produce?
Find a gap in the market
How to produce it?
Keep costs low, using cheaper materials, use machinery
Who to produce it for?
Consider age & gender ect
Factors that effect oppertunity cost
Price, quality, advertisement
Eg of land
Water, oil, wool
Eg of labour
Teachers, lawyers, chefs
Eg of capital
Hammers, computers, computers
Eg of enterprise
Principal, owner of shops
Description of the circular flow model
Households give resources to firms (work for businesses) in return the firms pay the households income. Firms produce goods and services (this is called output) which households use the money to spend on these goods and services. This is called expenditure. This is known as the simple circular flow model. However, there is a number of leakages and injections to consider. Households can save their money (leakage) which goes to the financial sector for investments (injections). Households have to pay tax (leakage) which goes to the finance sector for government spending (injection). Households lastly can pay for imports (leakage) which goes to the overseas sector which then goes to exports (injections). This is known as the complex circular flow model.
Non price factors of demand
Substitute goods, complementary good, tastes and preferences, demographics, advertising
Non price factors of supply
Number of suppliers, weather, cost of production, technology