Economics Flashcards
(20 cards)
Market
A situation where potential buyers are in contact with potential sellers and there is a mean of exchange
Consumer Sovereignty
The consumer is king (sovereign) in deciding where resources are allocated in a market economy
Opportunity cost
The lost alternative is to which the economic resources could have been allocated
Ecomonics
Allocations of scarce resources
3 economic questions
What to produce? How to produce? For whom to produce?
Resources
Land- natural resources (forests provide timber for building)
Labour- the person power available to work in the production process (trades)
Capital- the machinery, plants and buildings made by people (ladders, trucks, tractors)
Needs
Things that are essential to everyday basic living (food, clothing, shelter)
Wants
Things that people desire but are not essential to everyday basic living (TV, phones)
Scarcity
Having unlimited wants but limited resources
Complementary products
A good with a negative elasticity of demand. A goods demand is increased when the price of another is decreased.
Substitute products
A good with a positive elasticity of demand. A goods demand is increased when the price of another is also increased.
Factors of production
The inputs that are used in the production of goods and services. Land, labour, capital and entrepreneurship.
Law of demand
The higher the price of an item, the less that will be demanded. The lower price of an item, the higher demand.
Factors that could increase the the demand of a product
Elements that influence consumer willingness and ability to pay. a change in the weather/seasons, an increase in income, an increase in the price of a substitute product, a decrease in the price of a complementary product.
Law of supply
The higher the price that can be gained for an item, the more that will be supplied, the lower the price that can be gained for an item, the less that will be supplied.
Factors that could increase the supply of a product (ACE)
Weather events- cyclones, floods, droughts
Price of inputs- the lower the price of inputs, the more profit per unit and the more quantities producers are willing to supply.
Price of other products- if the price of other products rise, and the profits increase, the producers may switch to supplying more of this product and less of the original.
Availability of resources
Anything that provides more resources for production, allowing more to be supplied:
Increased labour force
New discoveries of raw materials such as iron, copper
Good climatic conditions so there are more raw materials such as wheat, cotton, milk.
Cost of resources
Anything that reduces the costs of production so that more money is available for other resources, leading to increased supply: Lower tax rates Lower wages for employees Lower interest rates Lower costs of raw materials
Efficiency in resources use
Anything that results in more efficient use being made of existing resources:
Better training of workers
New machinery that increases productivity rates
New production methods that reduce the amount of waste
Gross Domestic Product (GDP)
A measure of all goods and services produced in Australia during a year; obtained by adding together the total amount (in $)
