Year 8 Economics — Revision Notes and Flashcards Flashcards

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Circular Flow Model

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A diagram showing how money and real resources move between households, firms, government and the financial sector. It highlights real flows (goods, services, resources) and money flows (income, consumption, taxes, savings, investment).

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Factors of production

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The inputs used to produce goods and services: **land**, **labour**, **capital**, and **enterprise**. Each factor contributes in different ways, such as natural resources, human effort, tools and machines, and organising ability.

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Interdependence

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The mutual reliance between different sectors, firms and households in an economy. Decisions by one group (e.g., firms hiring labour) affect others (e.g., household incomes and spending).

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Law of demand

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States that, ceteris paribus, quantity demanded falls as price rises and increases as price falls. It reflects consumers responding to price changes by buying less or more of a good.

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Law of supply

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States that, ceteris paribus, quantity supplied rises as price rises and falls as price falls. Producers are willing to supply more when prices are higher because potential profits increase.

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Market

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Any arrangement where buyers and sellers interact to exchange goods, services or resources. Markets determine prices through supply and demand dynamics.

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Scarcity

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The condition of limited resources relative to unlimited human wants. Scarcity forces choices about how resources are allocated and what to produce.

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Taxes

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Mandatory payments collected by governments from individuals and firms. Taxes finance public spending and can influence behaviour through incentives or disincentives.

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Labour market

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Where workers supply labour and employers demand it; wages are the price of labour. Factors such as skills, education and regulations affect labour market outcomes.

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Housing market

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Where demand and supply determine the price and quantity of dwellings. Influenced by interest rates, population changes, government policy and construction costs.

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Stock market

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A marketplace for buying and selling shares in companies, enabling firms to raise capital and investors to buy ownership stakes. Prices reflect expectations about firm performance and economic conditions.

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Foreign exchange

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The market where currencies are traded and exchange rates are set. It facilitates international trade and investment by converting one currency into another.

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Capital

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Human-made resources used to produce other goods and services, such as machinery and buildings. Capital increases productivity and production capacity.

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Enterprise

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The skill of organising the other factors of production and taking risks to start and run businesses. Entrepreneurs drive innovation and coordinate production activities.

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Land

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Natural resources used in production, including agricultural land, minerals and water. Owners of land may receive rent as income.

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Labour (factor)

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Human mental and physical effort used in production, supplied by workers. Labour earns wages and is influenced by education, training and working conditions.

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Equilibrium price

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The price at which quantity demanded equals quantity supplied in a market. For example, in the blueberry market the equilibrium price is $6 and clears the market at the equilibrium quantity.

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Surplus

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Occurs when quantity supplied exceeds quantity demanded at a given price, producing downward pressure on price. Surpluses happen when price is above equilibrium.

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Shortage

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Occurs when quantity demanded exceeds quantity supplied at a given price, producing upward pressure on price. Shortages happen when price is below equilibrium.

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Leakages and injections

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Leakages remove money from the circular flow (savings, taxes, imports) while injections add money (investment, government spending, exports). The balance affects national income and economic activity.