Economics theme 1 Key terms

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Added Value
The difference between the price of a good or service and the cost of material inputs
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allocation of resources
referes to the way resources are used and shared out within the economic system
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assets
Anything of value that can be made to yield benefits. Businesses assets can be physical such as buildings or intangible such as skills of workforce.
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Break even point
The level of output where neither a profit or loss is made. Total revenue = total costs.
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Cash flow
The movement of cash into and out of the business
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Ceteris Paribus
Means all other things being equal, an approach which allows economists to consider one change at a time
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collateral
Anything that can be siezed by a lender if a loan is not repaid, often property.
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competitive pricing
A pricing strategy that consists of matching your competitors prices or slightly undercutting them
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complements
Goods and services that are bought together e.g. cars and petrol
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consumer soverignty
describes the role of the consumer in deciding the allocation of resources. By buying what they want most, consumers send a signal to produces about their preferences
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Contribution
Price minus variable costs (P-VC). This is used to calculate the break even point.
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cooperate culture
Is the set of important assumptions that are shared by people working in a particular business and influence the way decisions are made
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cooperate social responsibility
means taking decisions in a way that take into account all stakeholders' interests
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creative destruction
occurs when new technologies lead to new or improved products that drive competitors out of business
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Creditor
A person that the business owes money to, usually in exchange for materials or services
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demand
The quantity of goods or service that the consumer is wiling to buy, at a given time and price.
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division of labour
Involves individuals in specialising in one particular type of activity in the workspace. each employee has one specific task; repetition helps improve performance and effiecincy
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economic agents
Include all those who take decisions to buy, spend, produce, sell or in anyway effect how resources are used
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Entry
Refers to the way profit in a growing market attracts businesses to produce for it.
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Equilibrium Price
The price which quantity demanded = quantity supplied.
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Excess demand
Occurs when the quantity demand outstrips quantity supplied. This could cause a rise in price.
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Excess supply
Occurs when quantity supplied is greater than quantity demanded.
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Exchange rate
The price of one currency expressed in terms of another. it is determined by the interaction of demand for and supply of currency
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External benefits
Are benefits or positive side effects that benefit a third party who is neither the producer or consumer
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External costs
Are costs or negative side effects imposed on a third party who is neither produces or consumer
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Externalities
Positive or negative side effects caused by a product that effects third parties who are not consumers nor producers
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factors of production
Are the inputs: Land, Labour, Capital and enterprise.
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Government expenditure
The money spent in the economy over a period of time on publicly provided goods and services such as education and healthcare
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government failure
Occurs when government try to deal with market failure, but in doing so create other problems
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Gross domestic product (GDP)
a measure of total value of all goods and services produced: total income within one economic year
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gross profit
Turnover minus cost of sales. overheads, interest and tax have not been taken into account yet
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Gross profit margin
A measure of profitability. Shown as a percentage of turnover
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inferior products
Sell better when incomes are falling. Price elasticity is negative
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Infrastructure
includes transport facilities, communications, access to energy and water.
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market mapping
Using a grid showing two features of a market e.g. price and consumer age. Brands are added to suss gaps in the market
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market failure
Occur when social costs exceed social benefits. often happens when there are negative externalities
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market segmentation
Splitting up the market into groups of consumers with similar characteristics. Products can be aimed at a specific group.
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negative externalities
Are external costs that have a detrimental effect on the lives of people who neither bought or sold the product
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Normal goods
sell better when incomes are rising, positive price elasticity.
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Operating Profit
Measure of business profit. ( overheads/gross profit)
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over-consumption
Occurs when social costs are greater than private costs because of negative externalities
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PLC
Public limited company - limited liability, shares available to the public
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Positive externalities
Are external benefits that are experienced by third parties but paid for by someone else.
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Private limited companies
Have limited liability but cannot raise share capital from the government
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Private sector
The part of the economy which is run for private profit and not run by the state. Owned by individuals.
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profit signalling mechanism
The means by which the incentive of profit induces businesses to produce what consumers want
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Qualitative research
A market research method that involves finding out about the motivation and preferences of the consumer
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Quantitive research
A market research method that involves numerical measurement
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Social benefits
Are the total benefits of producing goods and services, calculated by adding private and external benefits
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tarde credit
The time allowed by a supplier before a business must make a payment. commonly 30-60 days
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Trade off
A situation where having more of one leads to having less of another.
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Venture capital
A form of business finance, unsecured funding provided by individuals or specialist firms in return for a proportion of a companies shares
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Other cards in this set

Card 2

Front

allocation of resources

Back

referes to the way resources are used and shared out within the economic system

Card 3

Front

assets

Back

Preview of the front of card 3

Card 4

Front

Break even point

Back

Preview of the front of card 4

Card 5

Front

Cash flow

Back

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