7–10 Economics and Business



absolute advantage

A country is said to have an absolute advantage when it can produce goods and services more efficiently than another country with the same set of resources.

basic standard of living

A standard of living adequate for the health and wellbeing of a person and his/her family, including food, clothing, housing, medical care, necessary social services, the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his/her control, special care for mothers and children, and social protection for all children.


An organisation, enterprise or business engaged in production and trade of goods or services, usually for profit.

business activity

All activity associated with production and trade of goods and services by a business.

business cycle

Alternate but irregular periods of prosperity and recession in an economy.

business environment

Contemporary events or trends that influence a business, industry or market.


All physical equipment (machinery, buildings, infrastructure) used by people in a process of production, for example, a secretary uses a computer; a bricklayer uses a trowel; a farmer uses a plough. In modern economies, intellectual property and knowledge are types of human capital – necessary resources in the production of goods and services.

circular flow of income

An economic model that provides a theoretical and simplified representation of operations of an economy, depicting interactions between various sectors of the economy (household, business, finance, government and foreign sectors), and flows of resources and income between them.

comparative advantage

An ability of a countries/economies to gain from trade with each other, regardless of their factor endowments. Given a choice of producing two products, a country is said to have a comparative advantage when it specialises in the production and export of particular goods and services that it can produce more efficiently; that is, at a lower opportunity cost than competitors.

competitive advantage

An advantage that a business holds over others in its industry, sector or location. The advantage means that the business is able to sell more of a product, or operate at a lower cost, or better meet the needs of consumers. Competitive advantage usually implies that a business is more profitable than its competitors.


A person or a group that is the final user of goods and services produced within an economy.

corporate social responsibility

When businesses consider the interests of stakeholders, society and the environment when making economic and business decisions.

cost-benefit analysis

Determination and evaluation of benefits and costs of a project or decision. The evaluation includes monetary and non-monetary effects.


An amount of goods or services that consumers are willing and able to purchase at a particular point in time.

economic development

A quantitative (output and value) and qualitative (wellbeing) improvement in the standard of living.

economic growth

An increase in the quantity of goods and services produced in an economy over a period of time; an increasing ability of society to satisfy the needs and wants of its people.

economic reasoning

Applying the principles of economics to understand possible causes and effects of economic events and changes; that is, using economic and business ideas to explain and analyse economic and business events and issues.

economic sustainability

Economic activity that supports economic needs of the present without compromising the ability of future generations to meet their own needs.

economic system

A system that coordinates the production and distribution of goods and services.


A social science (study of human behaviour) that studies decisions made by individuals, households, businesses, governments and other groups about how scarce resources are allocated in attempting to satisfy needs and unlimited wants.


All activities undertaken for the purpose of production, distribution and consumption of goods and services in a region or country.


Producing goods and services using the minimum amount of resources; obtaining the greatest amount of goods and services from limited resources; avoiding wastage of resources.


A business unit, company or project that is profit-oriented, non-profit, privately owned or government-controlled and that combines scarce resources for the production and supply of goods and services, and especially may require boldness or effort. Alternatively, the term may refer to the undertaking of a project or business.


A person who sets out to build a successful business in a new field. An entrepreneur’s methods are sometimes regarded as ‘ground-breaking’ or innovative.


A perceived fairness of the way scarce resources are used and the way benefits of production are distributed.


Uncompensated cost or benefit associated with a production or consumption of goods and services that affects the wellbeing of third parties or society more generally.

factors of production

Resources used in a production of goods and services classified as land, labour, capital and enterprise.


Tangible items that satisfy needs and wants; they can be seen and touched.

gross domestic product (GDP)

A total value of final goods and services produced in a country in a period of time.

industry sector

An area of a business operation. Businesses operate in the primary, secondary and tertiary industry sectors. The primary industry produces goods through the use and extraction of natural resources (for example, agriculture and mining). The secondary industry is concerned with converting primary industry materials into finished goods (for example, manufacturing, textiles and food). The tertiary industry provides services (for example, information, tourism and telecommunications).


A joint dependence between participants in an economy; that is, the reliance of consumers, workers, businesses and governments on each other. In modern economies, people tend to specialise in the production of a good or service, and trade that item for another that they could not provide or produce for themselves.

living standards

An amount of wealth, comfort, material goods and necessities that a particular individual, society or country has.


An exchange of goods, services or resources between buyers and sellers.

market economy

A system that coordinates the production and distribution of goods and services using markets.


In economics, a good or service that consumers consider necessary to maintain their standard of living.


A business that uses surplus funds to achieve its goals rather than distribute these funds to the owners. These often exist in the form of charities, service organisations and clubs.


Business processes that were originally performed in-house now moved overseas.

opportunity cost

What you have to forgo if you choose to do A rather than B; the value of the next best alternative that is foregone whenever a choice is made.

organisational structure

A structure put in place by a businesses to organise how tasks are divided and how resources are used to achieve the business’s goals and objectives. Tall (vertical) organisational structures exist in businesses with many levels of authority between senior management and workers, for example, in larger corporations. Flat (horizontal) organisational structures, common in small–medium enterprises, are those with fewer levels between management and workers.


Any task that could be performed by employees within an organisation being contracted out to a third party.


An individual and/or business involved in a production of goods and services.


A measure of how efficiently an economy uses resources such as labour and capital to produce goods and services. One of the most common measures of an economy’s productivity is gross domestic product (GDP).


A means to produce goods and services that satisfy needs and wants. The four economic resources (factors of production) are land, labour, capital and enterprise. Production usually requires a combination of resources.

resource allocation

Assigning of limited resources to produce goods and services to meet society’s needs and unlimited wants.


An economic problem of having needs and unlimited wants, but limited resources that can be used to achieve those needs and wants.

standard of living

A level of wealth and consumption of a population (such as a nation or socioeconomic group), measured by factors such as gross domestic product, inflation, income, employment, poverty rate, housing, access to and standard of health care and education, safety, and environmental quality.


An amount of goods and services that are available; an amount of goods that producers are willing to offer for sale.

sustainable development

A development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development values resources for their future as well as current uses.


A sacrifice that must be made when choosing how to use resources. The preferred (next best) alternative is known as the opportunity cost.


A good or service that is desired in order to provide satisfaction to a user, but which is not necessary for survival or to meet the basicstandard of living in a community.


An overall measure of quality of life for individuals and society.

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