Basic problems and key concepts
Goods that are unlimited and free, like air.
Free goods
How much a worker or business can produce.
Productivity
The amount of money needed to buy something.
Price
When the market does not work well and people do not get what they need
Market failure
Money people or businesses must pay to the government.
Taxation
Deciding how to use limited resources.
Resource Allocation
Abilities or talents used to do a job.
Skills
A place where buyers and sellers meet to exchange goods.
Market
Money the government gives to businesses to lower prices.
subsidy
The number of goods bought or sold.
Quantity
When there are not enough resources to satisfy everyone’s wants and needs.
Scarcity
Producing goods quickly and with little waste.
Efficiency
When demand equals supply; no shortage or surplus.
Equilibrium
A maximum price set by the government to stop prices going too high.
price ceiling
Goods that everyone can use and no one can be stopped from using (e.g. streetlights).
Public goods
An economy where the government decides what to produce and how much.
Command economy
When different workers do different parts of the same job to work faster.
division of labour
When demand is higher than supply; not enough goods.
Shortage
Effects on other people not included in the market price.
Externalities
An economy where businesses and consumers decide what to produce and buy.
Free market economy
The next best thing you give up when you make a choice.
When people, businesses, or countries need each other
Interdependence
When supply is higher than demand; too many goods.
Surplus
Goods that are bad for people but may be over-consumed (e.g. cigarettes).
Demerit goods
Goods that are limited and have a price because people want them.
Economic goods