Glossary Terms Economics Year 8

Economics The study of how people use resources to satisfy wants and needs.
Economic problem The problem of satisfying unlimited wants and needs with limited resources (scarcity).
Opportunity cost The benefits lost when one option is chosen over another.
Scarcity Shortage or short supply (limited resources)
Needs Things that are necessary for survival e.g., food, water
Wants Things we would like to have, but are not necessary for survival e.g., phone
Goods A tangible product which is produced. Examples includes books and paper
Services The action of doing something for someone else. Example hairdressing
Factors of There are four types of economic resources involved in the production of goods and
Production services.
Land Natural resources such as forests, fish, materials.
Labour It is the physical and mental effort provided by humans to the production of goods and
service.
Capital Any financial asset that is used. E.g., equipment, building and investments
Enterprise The ability to organise the other three resources effectively to produce goods and
services.
Entrepreneur A person who sets up a business or businesses, taking on financial risks in the hope of
profit.
Private business A firm held under private ownership. Can be a partnership or an individual owner.
Sole trader A business that is owned and operated by one person.
Corporation A business which is owned by shareholders.
Market Exists in any situation where buyers and sellers come together to exchange goods and
services for money.
Product market A place physical or non-physical where producers and consumers meet to trade.
Stock market A market where stocks and shares are traded.
Labour market A market where people buy and sell their labour e.g., seek.com
Financial market A market where financial services are traded e.g., money
Housing market A market where houses, properties and land are traded.
Circular Flow An economic model of the economy which represents the flow of money, goods and
Model services between households and businesses (firms).
Firms Referred to as the business sector that produces and sells goods and services.
Households Referred to as the domestic consumers of products.
Consumer A person who purchases goods and services.
Producer They make and sell goods and services.
Law of supply The higher the price that a good or service can be sold for, the higher the quantity that
suppliers are willing to produce.
Law of demand When prices rise, the quality demanded decreases and when prices fall, the quantity
demanded increases.