Miz Biz | Economics Essentials

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1. Advertising: Action taken to promote a good, service or brand. 17. Labour: All human effort involved in the production of goods
Advertising aims to increase demand for the product. Example: and services. Labour can be physical or mental, skilled or
Television adverts for McDonalds. unskilled.
2. Capitalistic economy: A market without government 18. Land: Natural resources which are 'gifts of nature. Examples
involvement. All production decisions are made by producers include water, soil, trees and fish.
responding to demand and supply in order to maximise 19. Law of Demand: Law outlining the relationship between price
profits. and demand. As price increases the quantity demanded of a
3. Consumer: A person who uses goods or services. Economists good decreases. Example: As the price of a cheeseburger
often refer to consumers as 'households'. Example: People increases from $2 to $3, quantity demanded may decrease
eating cheeseburgers at McDonalds from 400 to 200.
4. Consumption: Process of using up goods and services to 20. Mixed economy: economic system that combines both private
satisfy wants and needs in the short term. Example: Buying a ownership and government ownership of the means of
cheeseburger. production
5. Demand: The amount of a good or service consumers are both 21. Needs: Items neccesary for survival. Examples: Food, Water,
willing and able to purchase at a particular price and point in Shelter.
time. Example: If Cheeseburgers are $2 Mr P is willing and 22. Opportunity Cost: The most desirable alternative given up as
able to purchase 8 right now. the result of a decision
6. Economic problem: A problem of scarcity and choice. There 23. Production: Any activity by firms directed towards the
are unlimited wants but limited resources to produce the satisfaction of needs and wants through exchange. Example:
goods and services to satisfy those wants. McDonalds staff preparing cheeseburgers.
7. Economics: A social science examining the choices individuals 24. Productivity: Quantity of goods and services produced from a
make in order to satisfy their needs and wants with limited given quantity of resources. Example: If a worker learns a
available resources. method that allows them to make more burgers per hour, they
8. Enterprise: Human ability to organise the other factors of the have become more productive.
production process. Examples: School principal, business 25. Real income: The purchasing power of monetary income.
owner, people starting new companies. What can a consumer's income actually purchase. Example: If
9. Exports: A business transaction in which overseas dollars are most goods at the supermarket double in price, my real
paid to Australian producers for goods or services. Example: income is lower even though I am earning the same amount in
A foreign student studying at UWA. dollars.
10. Goods: Merchandise or manufactured articles. Tangible items 26. Rent: Payment in exchange for giving up land. Example:
which can be purchased and owned by households. Examples: Income paid to an owner of a private oval by a sports club.
iPads, pens and SUV's. 27. Resources: Anything used to help satisfy needs and wants.
11. Government spending: Expenditure by the government on Sometimes known as factors of production. Examples include
public goods and welfare payments. Example: Building a land, labour, capital and enterprise.
public school. 28. Savings: The part of a consumers income which is not spent on
12. Imports: A business transaction in which Australian dollars are consumption or paid in taxes. Example: The difference
paid to overseas producers for goods or services. Example: between an after tax income of $50K and expenditure of $30K
Buying a Toyota. = $20k Savings.
13. Income: Returns paid to owners of productive resources. 29. Services: Non material objects produced in order to satisfy
Examples include returns for giving up land, labour, capital needs and wants. Services are not usually 'owned' by the
and enterprise. purchaser. Examples: Accountant, Lawyer, Insurance.
14. Industry: Group of competing firms producing the same good 30. Substitute: An alternative which satisfies the same want or
or service or using the same processes. Example: Education need. Example: Consumers of cola products may consider
industry, Mobile phone industry. Coke and Pepsi substitute products.
15. Interest: The return on savings and the cost of borrowing. Also 31. Supply: The amount of a good or service firms are willing and
used by economists to describe payment in exchange for able to make available for sale at a particular price and point
capital. Example: Income earned by a hire company for in time. Example,if offered $2 per cheeseburger, McDonalds is
lending out musical instruments. willing and able to offer 200 burgers for sale tomorrow.
16. Investment: Dollars spent by firms on capital items intended 32. Taxation: Payments made to government by consumers and
to create future profits. Example: new machine. producers. Example: GST, income tax.
33. Wages: Payment in exchange for giving up labour. Example: Wages made by a student working at Big W.
34. Wants: Desires which are not necessarily needs. Examples include Champagne, BMW's and private education.