Edexcel A Level Economics - Key Economic Concepts

Microeconomics The study of individuals, markets, firms and industries. Focuses on the details of small-scale components within the economy. Macroeconomics The study of whole economic systems: national economies and the global economy. Looks at the whole economy on a large scale. Standards of Living (SoL) The quality of life enjoyed by people. This comprises material aspects (i.e. how much people are getting of the things they want and need), and non-material aspects (i.e. how healthy, educated, and happy they are) Factors of Production (FoP) The scarce resources available to be used to produce the goods and services that members of society want and need The four categories of Factors of Production Land, Labour, Capital, Entrepreneurship Gross Domestic Product (GDP) A measure of the total amount of economic activity that occurs within the economy in a given period of time 'Total Output' Another name for GDP Most commonly used factor to gauge 'Economic Growth' GDP (use) Household sector The individuals and families who make up the population (the 'citizenry') of the economy. Every member of society is a consumer of goods and services and thus their choices affect the economy. 'citizenry' The individuals and families who make up the population in an economy Model A simplified representation of reality Use of models Economists use these as tools to help analyse cause-and-effect relationships within the economy Firms The organisations of the Factors of Production into units which produce goods and services 'Corporate Sector' Another name for the collection of Firms in an economy Ownership of firms Viewed as owned and controlled by private citizens, rather than the government Government The organisation which acts on behalf of all the citizens of the economy to administer whatever resources are collectively provided within that society Some resources collectively provided by society administered by the government Laws, social infrastructure, education, healthcare, etc. 'Public sector' and 'State sector' Other names for the government in terms of the economy Trade The exchange, between two participants, of goods and services. Most often the buyer uses money to acquire the good or service from the seller. 'Barter' Where a good or service is bought with the provision of another good, or service Market A place, whether physical or virtual, where buyers and sellers come together to exchange goods, or services, in trade Financial Sector A subset of the 'Corporate Sector' which includes banks and investment firms Economic purpose of the Financial Sector To enable the movement of money around the economy, and to recycle savings back into the economy in the form of investment Money A special kind of commodity whose value is consistently perceived throughout society Functions of money A medium of exchange, a store of value, and a unit of account among other functions Private Limited Company (Ltd.) A firm which is privately owned, and therefore its shares are not traded on the stock markets but are held privately by its shareholders Public Limited Company (Plc.) A firm whose shares are listed on a stock market Shares An ownership stake in a firm Shareholder A part owner of a firm 'Equity shares' or simple 'Equity' Other names for shares Bonds A tradeable debt obligation. Traded on debt markets. The first investor who buys one is lending the value of it to the issuer. Borrower A bond 'issuer' (often firms and governments)