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Economics
definitions
| Term | Definition |
|---|---|
| Economics | How people, businesses and governments with limited resources make choices as to what to produce to satisfy demand |
| Resources | Used in production of goods and services |
| Factors of Production | Scarce resources used to produce wealth. There are four factors of production - Land, Labour, Capital and Enterprise. Each factor yields an income. |
| Land | All things provided by nature e.g. oil, minerals. Land yields rent |
| Labour | Human input in production process e.g. factory workers. Salary/ wages are reward for labour |
| Capital | All man-made things that help in production of goods/services e.g. equipment. Capital yields interest |
| Enterprise | Human input that brings the other three factors together to start a new business/ do something new. Reward is profit |
| Need | Essentials required for survival e.g. food |
| Want | Items we would like to have e.g. i-pod |
| Economic System | The way a country uses its factors of production to produce goods and services |
| Centrally Planned Economy | Government makes all the decisions about the production of goods/services. Government runs all the business so no private enterprises. AKA closed economy e.g. Cuba |
| Free Enterprise Economy | AKA Open economy. Lots of private industry and very little government intervention e.g. USA |
| Mixed Economy | Combination of both state and private businesses eg Ireland |
| Economic growth | Increase in amount of goods & services produced in an economy over a period of time, usually a year. Measured by GNP or GDP. |
| GNP | Gross National Product |
| GDP | Gross Domestic Product |
| Inflation | Sustained increase in general level of prices (cost of living) over period of time, usually a year. Measured by CPI |
| CPI | Consumer Price Index |
| Circular Flow of Income | how money flows through the economy |
| Circular Flow 1 | households supply labour and in return receive income from firms |
| Circular flow 2 | households also now buy goods and services which the firm supply (all income is spent) |
| Circular Flow 3 | households now spend and save which firms are able to access through loans from banks |
| Circular Flow 4 | introduction of government, foreign trade to include more leakages and injections |
| Leakage | money taken out of circular flow e.g. savings, taxation, imports |
| Injections | additions to money in circulation e.g. government investment, exports and business spending on capital |
| Economies of scale | benefits of mass production i.e. cheaper unit cost e.g. robotics, bulk buying, specialised workers (specific jobs) |
| Diseconomies of scale | unit cost increases as business expands e.g. loss of personal touch with customers, demotivated workforce |
| State-owned Bodies | Run by the government |
| Reasons for State-owned | large amount of funding needed, develop natural resources, provide essential services, promote Ireland, promote tourism |
| Privatisation | transferring ownership from the State to private investors |
| Reasons for privatisation | body losing money, govt need money, e.g. Aer Lingus |
Created by:
MsBradyJCBSTU
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