Chapter one: The reason for individuals, organisations and societies having to make choices

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Economics
the study of how to allocate scarce resources in the most effective way
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Economic problem
how to allocate scarce resources among alternative uses
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Household
group of people whose spending decisions are connected
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Microeconomics
the study of how households and firms make decisions in markets
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Macroeconomics
the study of issues that affect economies as a whole
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Model
a simplified view of reality that is used by economist as a means of explaining economic relationships
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Factor of production
the resource inputs that are available in an economy for the production of goods and services
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Goods
tangible products. Products that can be see and touched such as cars and food
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Services
intangible products. Products that cannot be seen or touched such as banking, insurance and beauty salons
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Land
natural resources in an economy
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Labour
the quantity and quality of human resources
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Capital
man-made aids to production
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Entrepreneurship
the willingness of an entrepreneur to take risks and organise production
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Entrepreneur
someone who bears the risks o the business and who organises production
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Factor endowment
the stock of factor of production
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Production
the output of goods and services
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Want
anything you would like irrespective of whether you will have the resources to purchase it
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Scarcity
a situation where there are insufficient resources to meet all wants
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Choice
the selection of appropriate alternatives
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Opportunity cost
the costs of the next best alternative, which is foregone when a choice is made
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Specialisation
the concentration by a worker or workers, firms, region or a whole economy on a narrow range of goods and services
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Exchange
the process by which goods and services are traded
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Subsidy
a payment by a governing body to encourage the production or consumption of a product
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Division of labour
the specialisation of labour where the production process if broken down into separate tasks
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Productivity
output, or production of a goods or service per worker
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Production possibility curve
this show the maximum quantities of different combinations of output of two products, given current resources and the state of technology
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Developed economy
an economy with a high level of income per head
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Developing economy
an economy with a relatively low level of income per head
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Trade-off
the calculation involved in deciding on whether to give up one good for another
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Economic growth
change in the productive potential of an economy
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Productive potential
the maximum output that an economy is capable of producing
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Economic system
the way in which production is organised in a country or group of countries
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Market economy
an economic system whereby resources are allocated through the market forces of demand and supply
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Price system
a method of allocating resources by the free movement of prices
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Supply
the quantity of a product that producers are willing and able to provide at different market prices over a period of time
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Demand
the quantity of a product that consumers are willing and able to purchase at various prices over a period of time
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Command economy
an economic system in which most resources are state owned and also allocated centrally
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Mixed economy
an economic system in which resources are allocated through a mixture of the market and direct public sector involvement
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Other cards in this set

Card 2

Front

how to allocate scarce resources among alternative uses

Back

Economic problem

Card 3

Front

group of people whose spending decisions are connected

Back

Preview of the back of card 3

Card 4

Front

the study of how households and firms make decisions in markets

Back

Preview of the back of card 4

Card 5

Front

the study of issues that affect economies as a whole

Back

Preview of the back of card 5
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davidsalter

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This is a set of 36 flash cards covering the basic economic problem and the early parts of the AS course.

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