How the Market Works

?
  • Created by: al2000
  • Created on: 09-05-15 09:33
What is the difference between a need and a want?
Needs are things essential to survive whereas wants are something that you would like to have
1 of 45
Resources
Something used to create output
2 of 45
Productivity
Output per worker per period of time
3 of 45
What are factors of production?
The resources we have available to produce goods and services -
4 of 45
Land
Includes both the land itself and all the natural resources on and below the land which are available for production
5 of 45
Labour
The human input into the production process
6 of 45
Capital
Refers to goods that are used to produce other goods, such as machinery
7 of 45
Enterprise
Having ideas and taking risks in setting up or running a business
8 of 45
What sector do mining, farming, fishing and the extraction of other raw materials come under?
The Primary Sector
9 of 45
The Secondary sector
Where raw materials are manufactured into goods
10 of 45
The Tertiary sector
The service sector, such as tourism, banking and public transport
11 of 45
What is the basic economic problem?
Wants are infinite but resources are finite
12 of 45
Opportunity Cost
The next best alternative foregone when making a choice - basically what we give up when we make a choice
13 of 45
Market
Where buyers and sellers meet to exchange goods and services (does not have to be a face to face meeting)
14 of 45
Market economy
Where all resources are allocated by private individuals and groups
15 of 45
Planned economy
Where all resources are allocated by the government
16 of 45
Mixed economy
Where some resources are allocated by the government and some by private individuals or groups
17 of 45
What kind of economy does the UK have?
A mixed economy as there are public and private enterprises
18 of 45
What is the difference between the public and private sector?
The public sector is where organisations are run by the government, whereas private is where firms are owned by private groups
19 of 45
What is the main aim of firms in the private sector?
Profit maximisation
20 of 45
Surplus
When more is produced than is required. The surplus can be exchanged for money or other goods
21 of 45
What are the four main functions of money?
Store of value, Medium of account, Means of deferred payment and Unit of account
22 of 45
Competitive market
A market situation in which there are a large number of buyers (demand) and sellers (supply)
23 of 45
What are the main areas of competition for firms?
Price, Quality, Innovation, Advertising, Promotions
24 of 45
Monopoly
A situation where there is only one firm selling in a market
25 of 45
Monopoly power
When a firm has 25% of the market share eg.Tesco holds approx 31% of market share in the supermarket industry
26 of 45
Demand
The quantity buyers are willing and able to buy at a given price in a given period of time
27 of 45
Give an example of effective demand
If I want a bike that is $500 and I have $500 to spend - I am both willing and able to buy the bike
28 of 45
What causes movements along the demand curve?
Changes in the price of a good or service
29 of 45
Contraction of demand
A fall in the quantity demanded due to a rise in price
30 of 45
Extension of demand
A rise in the quantity demanded due to a fall in price
31 of 45
Inferior goods
Goods for which the demand falls when income rises
32 of 45
Factors which cause the demand curve to shift can be remembered by...
PASIFIC
33 of 45
What does PED measure?
The responsiveness of the quantity demanded to a change in price
34 of 45
Supply
The quantity a producer is willing and able to produce at a given price in a given period of time
35 of 45
Factors which cause the demand curve to shift can be remembered by...
PINTSWC
36 of 45
What does PES measure?
The responsiveness of the quantity supplied to a change in price
37 of 45
How do you calculate PES?
PES= % change in quantity supplied / % change in price
38 of 45
How do you calculate PED?
PED= % change in quantity demanded / % change in price
39 of 45
Equilibrium
The point where demand and supply meet
40 of 45
What influences price in a competitive market?
The forces of demand and supply
41 of 45
What is the difference between indirect and direct taxes?
Indirect taxes are taxes on spending (VAT), Direct taxes are taxes on income and wealth (income tax)
42 of 45
Subsidy
A payment given to a firm, usually by the government
43 of 45
Specific tax
A tax placed on a good or service which is specific to the amount of money per unit bought eg. $2 tax on each bottle of wine
44 of 45
Ad Valorem tax
A tax placed on a good or service which is a percentage of the price
45 of 45

Other cards in this set

Card 2

Front

Resources

Back

Something used to create output

Card 3

Front

Productivity

Back

Preview of the front of card 3

Card 4

Front

What are factors of production?

Back

Preview of the front of card 4

Card 5

Front

Land

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all What is the economic problem? resources »