Chapter 1: Economics and Business

Tangible products

Intangible products

The commitment of a society’s productive endowments, such as labour and machinery, to particular uses or patterns of use. For a society to produce a particular good or service it must allocate resources to the appropriate industry.

Cross-border physical investment in productive capacity.

A framework that brings buyers and sellerstogether.

Consumption choices of individuals in competitive markets condition production patterns. Producers must follow the lead given by the purchasing decisions of consumers. If they produce goods and services that consumers do not want they will bankrupt themselves. Hence consumers exercise sovereignty over producers.

A market in which there is no government interference or intervention.

An economy in which there is some role for government in resource allocation.

An economy in which resource allocation is almost wholly determined by government.

An economy in which resource allocation by the state is being eroded in favour of allocation determined by private firms and consumers.

Implies that all resources are scarce in relation to the limitless wants present in every society.

The cost of an action measured in terms of the best alternative action that must be given up.

The study of the behaviour of individual households and firms, and the determination of the relative prices of particular goods and services.

The study of the economy as a whole.

A decline in real GDP that lasts for at least two consecutive quarters of a year.