Post by Admin on Jun 19, 2016 11:26:51 GMT
Economics is the study of how people and businesses with limited income make decisions about what they spend their money on.
Factors of Production
Land is the natural resources available in a country that can be used to produce goods and services. The payment for land is rent.
Labour is a human effort that helps to produce goods and services. The payment for labour is wages.
Capital is anything that is made by humans that is then used to help to produce other goods and services. The payment for capital is interest.
Enterprise is using all the factors of production and taking a risk to set up a business. People who supply enterprise are called entrepreneurs. The payment for enterprise is profit.
Types of Economic Systems
Centrally planned economy – Here the government of the economy makes all the decisions about the production of goods and services. E.g. Cuba.
Free enterprise economy – Here the citizens of the country are free to make all the decisions about the production of goods and services with little interference from the government. E.g. USA.
Mixed economy – This is a combination of the two other economies and sees a sharing approach to the production of goods and services. E.g. Ireland.
Terms
Opportunity cost is the item we do without when we have to make a choice between two or more actions. It is impossible to satisfy everybody’s needs and wants.
Inflation is the increase in the general level of the price of goods and services over a period of time.
Deflation is the decrease in the general level of the price of goods and services over a period of time.
Rate of Inflation
(The increase in prices in year 2) / (divide) (The level of prices in year 1) X 100
The official measurement of inflation is called the consumer price index.
Causes of Inflation
An increase in the cost of producing goods is passed onto the consumer so that the manufacturer can maintain profits.
The demand for goods is greater than the supply of goods. Consumers will compete with each other, thus pushing up the prices.
The cost of importing goods increases.
Increases in indirect taxes.
Effects of Inflation
Increases the cost of living.
It causes demands for wage increases to compensate for the inflation.
It discourages saving because people decide to spend their money before its value decreases any further.
Terms
Economic growth occurs when more goods are produced in a country one year than were produced the previous year. It creates employment and improves standard of living.
Gross domestic product is a total amount of goods and services produced in an economy in one period.
Gross national product is the GDP – profits sent out of the country by foreign owned companies located in the country, plus profits returned to the local firms based abroad. i.e. it is the amount of money left in the country for spending or saving.
Recession is if less goods and services are produced in two consecutive quarters then the national economy is officially in a recession.
Factors of Production
Land is the natural resources available in a country that can be used to produce goods and services. The payment for land is rent.
Labour is a human effort that helps to produce goods and services. The payment for labour is wages.
Capital is anything that is made by humans that is then used to help to produce other goods and services. The payment for capital is interest.
Enterprise is using all the factors of production and taking a risk to set up a business. People who supply enterprise are called entrepreneurs. The payment for enterprise is profit.
Types of Economic Systems
Centrally planned economy – Here the government of the economy makes all the decisions about the production of goods and services. E.g. Cuba.
Free enterprise economy – Here the citizens of the country are free to make all the decisions about the production of goods and services with little interference from the government. E.g. USA.
Mixed economy – This is a combination of the two other economies and sees a sharing approach to the production of goods and services. E.g. Ireland.
Terms
Opportunity cost is the item we do without when we have to make a choice between two or more actions. It is impossible to satisfy everybody’s needs and wants.
Inflation is the increase in the general level of the price of goods and services over a period of time.
Deflation is the decrease in the general level of the price of goods and services over a period of time.
Rate of Inflation
(The increase in prices in year 2) / (divide) (The level of prices in year 1) X 100
The official measurement of inflation is called the consumer price index.
Causes of Inflation
An increase in the cost of producing goods is passed onto the consumer so that the manufacturer can maintain profits.
The demand for goods is greater than the supply of goods. Consumers will compete with each other, thus pushing up the prices.
The cost of importing goods increases.
Increases in indirect taxes.
Effects of Inflation
Increases the cost of living.
It causes demands for wage increases to compensate for the inflation.
It discourages saving because people decide to spend their money before its value decreases any further.
Terms
Economic growth occurs when more goods are produced in a country one year than were produced the previous year. It creates employment and improves standard of living.
Gross domestic product is a total amount of goods and services produced in an economy in one period.
Gross national product is the GDP – profits sent out of the country by foreign owned companies located in the country, plus profits returned to the local firms based abroad. i.e. it is the amount of money left in the country for spending or saving.
Recession is if less goods and services are produced in two consecutive quarters then the national economy is officially in a recession.