Markets in Action - Reasons for individuals, organisations and societies having to make choices

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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Group of people whose spending decisions are connected
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The study of how households and firms make decisions in markets
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The study of isues that affect economies as a whole
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A simplified view of reality that is used by economists 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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tangible products, i.e. products that can be seen and touched, such as cars , food and washing machines.
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intangible products, ie.e. products that cannot be seen or touched, such as banking , beauty therapy and insurance.
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Natural resources in an economy.
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The quantity and quality of human resources
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Man-made aids to production.
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The willingness of an entrepreneur to take risks and organise production
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Someone who bears the risks of the business and who organises production.
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Factor Endowment
The stock of factors of production
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The output of goods and services
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Anything you would like, irrespective of whether you have the resources to purchase it.
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A situation where there are insufficient resources to meet all wants
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The selection of appropriate alternatives
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Opportunity cost
The cost of the (next) beswt alternative which is foregone when a choice is made.
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The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services.
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The process by which goods and services are traded.
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A payment by a governing body to encourage the production or sonsumption of a product.
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Division of Labour
The specialisation of labour where the production process is broken down into seperate tasks.
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Output, or production of a good or service per worker.
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Production possibility curve
This shows 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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The caluculation 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 whihc 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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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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The quantity of a product that consumers are able and willing 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 allocatred 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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Economic Problem


How to allocate scarce resources among alternative uses.

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