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GCSE Economics P1
OCR Definitions for Paper 1
| Term | Definition |
|---|---|
| Capital | The factor of production that relates to human-made aids to production. |
| Opportunity cost | The cost of the next best alternative given up when making a choice. |
| Government | A political body that decides how a country is run and manages its operation. |
| Consumer | an individual / household that directly uses a good or service |
| Producer | an individual, company or country that makes or supplies a good or service |
| Land | the factor of production that relates to natural resources |
| Unlimited wants | The infinite desire for goods and services consumers would like to have |
| Economic problem | How to best allocate scarce resources in order to satisfy the unlimited wants of people |
| The factors of production | resources used in the production process. |
| Labour | the factor of production that relates to human resources. |
| Enterprise | the factor of production that relates to organisation and risk bearing activity. |
| Scarce resources | When there is an insufficient amount of something to satisfy all wants. |
| Economic choice | An option for the use of selected scarce resources. |
| Economic sustainability | The best use of scarce resources to promote development or growth now and in the future. |
| Social sustainability | The impact of growth or development that promotes an increase in the quality of life for all, now and in the future. |
| Environmental sustainability | When the impact of growth or development on the environment is small and manageable now and in the future. |
| Market | Where buyers and sellers come together in order to buy or sell goods and services. |
| Primary sector | Direct use of natural resources such as extracting basic materials from land and sea. |
| Secondary sector | All activities in an economy that involve manufacturing or construction. |
| Tertiary sector | All activities in an economy that involve a service. |
| Goods | Tangible products ie products that can been seen or touched. |
| Services | Intangible products ie products that cannot been seen or touched. |
| Factor market | Market in which the services of the factors of production are sold. |
| Product markets | Where final goods and services are offered to consumers businesses and the public sector. |
| Specialisation | The process whereby individuals, firms, regions or countries focus on producing what they are best at. |
| Exchange | Giving up of something you have in return for something you do not have. |
| Demand | The quantity of goods/services that consumers are willing and able to buy at a given price, at a given time. |
| Individual demand | The demand for a product by a consumer/individual. |
| Market demand | The demand for a product by all consumers/individuals in a market. |
| Price elasticity of demand (PED) | The responsiveness of quantity demanded to a change in price. |
| Supply | The quantity of goods/services that producers are willing and able to provide to the market at a given price, at a given time. |
| Individual supply | The supply of a product by one producer. |
| Market supply | The supply of a product by all producers in a market. |
| Movements along the demand or supply curve | are caused by changes in price. |
| Shifts of the demand or supply curve | are caused by non-price factors. |
| Price elasticity of supply (PES) | The responsiveness of supply to a change in price. |
| Price | How much you pay for a good or service, determined by demand and supply. |
| Equilibrium | Where demand equals supply. |
| Worth | How much you value something. |
| Price determination | The interaction between demand and supply. |
| Allocation of resources | How scarce resources are distributed to producers and allocated to consumers. |
| Market forces | The forces of demand and supply. |
| Competition | Where different firms in a market are trying to sell similar products to consumers. |
| Market economy | Where the forces of demand and supply determine the allocation of resources. |
| Monopoly | A monopoly exists when a market is dominated by one producer of a good or service. |
| Oligopoly | A few large firms control the majority market share. |
| Production | Total goods or services produced in a period of time. |
| Productivity | Output per unit of input, how efficient a firm is. |
| Cost | The amount of money a producer has to pay for supplying the good or service. |
| Excess demand | The quantity demanded is greater than quantity supplied at the current market price. |
| Total cost (TC) | All costs added together. |
| Average cost (AC) | Total costs divided by total output. Unit cost of production. |
| Total revenue | Total income from the sale of goods and services. |
| Average revenue | Total revenue divided by total output. Revenue per unit sold. |
| Profit | Total revenue minus total costs. Money left over after all costs have been paid. |
| Loss | When total revenue is less than total cost. |
| Economies of scale | Fall in long run average costs due to an increase in the scale of production. |
| Production | Total goods or services produced in a period of time. |
| Productivity | Output per unit of input, how efficient a firm is. |
| Labour market | Workers sell their labour and firms buy their labour. |
| Determination of wages | Interaction of supply of labour and demand for labour. |
| Supply of labour | The amount of workers willing and able to supply their labour (including the unemployed). |
| Demand for labour | Is derived demand due to demand for the good or service the labour produces |
| Gross pay | Earnings before any deductions are taken. |
| Net pay | Earnings after all deductions have been taken. |
| Income tax | A direct tax levied on income. |
| National insurance contributions | Contributions paid by employee and employer to pay towards state benefits. |
| Pension contributions | Contributions paid by employee and employer towards future pension payments. |
| Money | Anything that is generally accepted as a means of payment for goods and services. |
| Medium of exchange | Anything that sets the standard for exchange of goods and services that is acceptable to all parties. |
| Financial sector | Firms that provide financial services. |
| Interest rates | The cost for borrowing and the reward for saving. |
| Investment | The purchase of capital goods. |
| Financial institutions | Banks (central bank and commercial banks), Building societies and insurance companies. |
| Central bank (Bank of England) | The institution responsible for issuing a country’s banknotes, acting as a lender of last resort for other banks, and implementing monetary policy (e.g. setting interest rates). |
| Commercial (retail) Bank | Take deposits from customers individuals and firms and turn them into assets for the bank. |
| Building societies | Mutual financial institution owned by its members. |
| Insurance company | Institution that guarantees to cover for losses in return for a premium. |
Created by:
victoria.shaw
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