unit 1-2
wants are infinite, resources are finite |
factors of production: land, labour, capital, enterprise |
land: natural resources, extracted and cultivated from nature. |
labour: mental and physical human output into production |
capital: man made means of production |
enterprise: entrepreneurs who organize FoP and take risks |
production possibility curve: shows max combinations of products that can be produced by economy in given time period with limited resources. points beyond curve: unattainable, within the curve is inefficient |
free market system: decisions by private sector, no role to govt. price mechanism plays a role |
price mechanism: consumer demand impacts supply |
elasticity: measure of how quickly consumers/producers respond to a change in price |
PeD= percentage change in quantity/percentage change in price |
perfectly inelastic: vertical, perfectly elastic: horizontal. more than 1: elastic, less than 1: inelastic |
PeD impacted by: no. of substitutes, time needed to purchase, proportion of income spent, necessity/habit forming, cost of switching brands, brand loyalty, breath of definition of product |
PeS impacted by: spare capacity (more capacity = more elastic), time to manufacture (quicker manufacturing = higher elasticity), amount of stock/ability to stock, mobility + cost of FoP |
market failure: when the price mechanism results in inefficient allocation of resources. shows through the existences of externalities, public goods, FoP immobility, monopolies |
social costs = private costs + external costs. social benefit = private benefit + external benefit |
merit goods: goods which have an unappreciated benefit. often underconsumed and underproduced. |
demerit goods: goods that have an unappreciated cost. often overconsumed and overproduced |
public goods: a good not provided by market forces, has to be provided by govt. non-rivial and non-excludable |
monopoly: >26% share of market, can charge higher prices and restrict quantity. |
direct tax: tax on income, (income, wealth, corporation) |
indirect tax: tax on spending, (VAT, excise) |
unit 4
unemployment: people willing and able to work but don't have a job. |
price stability: maintains economic stability + products can compete with international products |
economic growth: sustained expansion of production possibilities over time, increase in quantity + quality of FoP, measure of aggregate demand and aggregate supply |
aggregate demand: total demand for goods and services within a particular market |
aggregate supply: total output of all producers in an economy |
balence of payments: record of a country's transactions with an other countries |
budget: govt financial plan showing govt income and expenditure |
progressive tax: increases with income |
proportional tax: fixed with percentage income |
regressive tax: decreases with income increased |
fiscal policy: govts seek to influence total demand in economy by changing either govt spending/taxation/increases |
monetary policy: process of controlling supply, cost of money, availability of money. influences AD level |
money supply: the money in circulation in economy |
exchange rates: value of one currency against another. bought/sold as commodity to change price. manipulated by exports/imports |
quantitive easing: affect amount of money in circulation by printing more money |
supply-side policy: govt policies that stimulate producers to produce more. increases AS, more productivity capacity/potential of economy |
economic growth: increase in amount of goods/services produced by economy over time. |
GDP: measuring adding total spending on final goods/products produced in a country over a year period. C+I+G+ (X-M) |
nominal GDP: total GDP while inflation hasn't been taken into account. (still in the figures) |
real GDP: total GDP after inflation has been taken into account. (out of the figures) |
economic recovery: real GDP grows faster than normal. AD increases, firms output increases, job creation. |
economic boom: demand for goods increases, output rises, profits peak, economy can 'overheat' |
economic recession: real GDP falls. Ad falls and production is cut. less employment, profits/income lower. has to be two/more consecutive quarters of negative economic growth. |
labour force: total people working age in work/actively seeking work |
labour force participation rate: labour force as a proportion of working-age population, % population that is economically active |
employment by industrial sector: people working in agriculture/manufacturing/ related services |
employment status: no. of people employed full time/part-time/temp work |
unemployment: people registered as being without work as proportion of labour force |
economically active population: supply of work |
claimant court: counting individual who register as unemployed. usually counted by no. of people claiming unemployment benefit. |
labour force survey: data gathered from survey of sample households for unemployment rate. determines people employed. used worldwide and is standardized. |
frictional unemployment: short-lived unemployment as jobs change. seasonal unemployment: temporary unemployment because some production and AD is seasonal |
cyclical unemployment: prolonged, wide spread unemployment during recessions due to falling AD |
structural unemployment: long lived unemployment caused by industrial decline. workers are unemployed and have unwanted skills. |
inflation: sustained increase in av. price level of country. |
deflation: sustained fall in gen. price level inflation is negative |
creeping inflation: prices increase by a few % per year |
hyperinflation: prices rising significantly over 100% |
malign deflation: sustained decline in GPL in economy due to demand slump |
disinflation: slow down in rate at which prices are rising in general |
stagnation: economic situation with high/rising unemployment + inflation |
imported inflation: rising prices caused by increase in import costs following fall in value of exchange rate of importing country's currency |
weighting: technique of adjusting certain payments by price index to preserve real value/purchasing power |
unit 4
unemployment: people willing and able to work but don't have a job. |
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unit 3
money: medium of exchange used to buy goods and services. is a unit of account, store of wealth, standard of deferred payment, medium of exchange |
characteristics of money: durable, acceptable, divisible, portable, scarce |
banks: act as a financial intermediary between borrowers and savers. |
interest rate: cost of borrowing as a % of unit of money. |
stock exchange: market where shares and securities are sold and bought |
stock brokers: individuals who buy/sell stocks on stock exchange to pay loans |
ipo: initial public offering |
bull market: prices going up, bear market: prices going down |
dividend: share of profit given to shareholder per share |
yield: dividend as % of share price |
joint stock companies: shares sold for permanent capital, shares never paid back. people purchasing become the shareholders, get dividend. |
bonds: sold as govt as loans for a set time. paid back with interest |
average propensity to consume: the likelihood of spending your income. APC = consumption/disposable income |
derived demand: demand for goods/services increase, demand for other thing increases. like labour |
trade unions: associations representing workers' interests. general unions support workers from different industries. there can be craft unions, non-manual unions, industrial unions, etc |
collective bargaining: how trade unions negotiate with employers over wage and non-wage benefits |
arbitration: involves employers and unions agreeing to let independent referee (often senior govt official/lawyer) to settle industrial dispute. |
overtime ban: workers refuse to work more than normal hours. |
work to rule: workers deliberately slow production by complying rigidly with every rule and regulation |
go-slow: workers carry out tasks slowly to reduce production |
strike: workers refuses to go into to work and protest, picket outside work to stop deliveries and prevent non-unionized workers from working. |
specialization: the process by which an employee becomes more skilled at a subset of work, doing what you're best at |
division of labour: one person specializes at one task of production rather than the whole process. |
horizontal integration: EoS, increases market share. same level of production |
vertical backward integration: secures supply and quantity of goods. goes towards suppliers/primary sector |
vertical forward integration: captures retail market. goes towards consumers |
take-over: one company buys shares of another, can be hostile or friendly |
unit 5
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less-developed economy: lower levels of human/economic development, diversification, low industrial development, lack of infrastructure, low education levels and skills, low average incomes and poor living standards, low average life expectancy |
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unit 3 cont.
merger: two companies join for a new company with a new name. |
joint venture: two businesses set up separate, new business for a short period of time |
conglomerate integration: mergers and takeovers of two firms making a diversified portfolio by producing different products |
EoS: number of units produced increase, cost per unit decreases |
diseconomies of scale: the rise in cost per unit as output increases. |
internal EoS: when companies increase output to reduct costs, external: when costs fall because industry is growing, costs fall |
Really Fun Mums Try Making Pie. risk-bearing, financial, managerial, technological, marketing, purchasing |
production: total output of goods/services in production process, increased by using factor inputs/ increased productivity of FoP |
productivity: measure of degree of efficiency in use of factor inputs in production process av. of output/worker, revenue/sales, output/machine |
fixed costs: CoP paid regardless of how much is produces. (rent, salaries, etc) |
variable costs: CoP that change with output (raw materials, wages) |
revenue: money payable to a hushes from sales of product. |
break-even: the point at which the total revenue = the total costs |
profit maximisation: goal of private sector firms, pos. difference between firm's revenue and costs. |
market structure: how many firms are in a structure, the influence of the firms on pricing, differences among products, barriers to entry/exit |
perfect competition: large no. of firms that have equal say in pricing. buyers buy homogenous product, no obstacles to entry/exit. |
monopolistic competition: many firms, products differ, low price control |
unit 3 cont.
oligopoly: market controlled by few main firms |
monopoly: one seller of particular good/service |
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