Economics Key Terms - Page 16

Question 1

Choice

Answer 1

A decision between one or more alternatives

Question 2

Scarcity

Answer 2

Resources are limited in supply, e.g. raw materials and time

Question 3

Trade-off

Answer 3

Where the selection of one choice results in the loss of another

Question 4

Opportunity cost

Answer 4

The loss of the next most desired alternative when choosing a particular course of action

Question 5

Demand

Answer 5

The quantity of a good or service a consumer would like to buy at a given price in a time period

Question 6

Price insensitivity

Answer 6

Where changing the price of a product by a certain amount leads to a smaller change in demand

Question 7

Necessity

Answer 7

A good or service that a consumer views as vital

Question 8

Substitute

Answer 8

A good or service which is a possible alternative to another good or service

Question 9

Price sensitivity

Answer 9

Where changing the price of a good or service by a certain amount results in a loss of revenue

Question 10

Stakeholders

Answer 10

Groups which are interested in the performance of a business

Question 11

Shareholders

Answer 11

The owners of a limited company. They buy shares which represent part ownership of a company

Question 12

Competition commission

Answer 12

The body which investigates cases where firms merge or are taken over to decide whether such activity is in the public interest. It has the power to prevent mergers or take-overs where these are seen to reduce the level of competition

Question 13

Dividends

Answer 13

The payments made to shareholders from profits of a company

Question 14

Third party

Answer 14

A group or an individual that is not directly involved in a decision

Question 15

Externalities

Answer 15

The effects of an economic decision or individuals and groups outside who are not directly involved in the decision

Question 16

Negative externalities

Answer 16

Those costs arising from business activity which are paid for by people or organisations outside the firm

Question 17

Positive externalities

Answer 17

Those benefits arising from business activity which are experienced by people or organisations outside the firm. The firm receives no payment for the benefits received

Question 18

Profits

Answer 18

The rewards of risk-taking. Profit is the difference between the amount of revenue earned by a fireman the total costs of producing the goods and services the business sells

Question 19

Market share

Answer 19

The quantity sold by a business as a percentage of total sales in a market

Question 20

Competitiiveness

Answer 20

The strength of a business’s position in a market measured by market share and profitability. It reflects whether people are prepared to use the business over its rivals