Economics Revision

In: Business and Management

Submitted By LiamPow
Words 412
Pages 2
Basic Economic Problem- The basic economic problem is that there is not enough resources available to fulfil all of the customer needs and wants. This is called SCARCITY. Due to the problem of scarcity, it causes the problem of choice as there are unlimited amounts of want and a limited amount of resources available. This occurs in both a micro (individual/small business) environment and a macro (large business/global economies) environment.
Opportunity Cost- The term opportunity cost means that an opportunity for one development has to be given up for another development. Businesses usually have to make this SACRAFICE. Opportunity cost tends to deal with the actual product or service rather than the money to provide this money or service.
Supply and Demand
Demand- The consumers have the willingness and ability to buy products from the companies that produce a product or service.
Law of Demand: - If Prices rise then demand falls (Contracts.) If Prices fall then demand rises. (Extends.)
Factors that affect Demand: * Consumer income * Tastes and Preferences * Prices of related goods and services * Expectations about future prices and incomes * Number of potential customers
Supply- Producers of a good or service have the willingness and ability to provide consumers with their product or service.
Law of Supply: - If price rises then supply increases (Extends.) If price falls then supply falls (Contracts.)
Factors that affect supply: * Production costs: how much a goods costs to produce. Production costs are the cost of the inputs; primarily labour, capital, energy and materials. They depend on the technology used in production, and/or technological advances. * Firms' expectations about future prices * Number of suppliers * If Production costs rise then the price of the product will increase leading to a drop in…...

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