1.1 Econ problem
The individuals or households who purchase goods and services to satisfy their personal needs and wants.
Who are consumers?
One of the factors of production that refers to the manufactured (non-natural) resources used in the production process to make goods or provide services.
What is capital?
The cost of the next best opportunity that is sacrificed when making a choice or when a decision is made.
What is opportunity cost?
When the demand for a product exceeds its supply, resulting in shortages in the market.
What is excess demand?
The law that states there is a positive relationship between price and quantity supplied.
The law of supply
When the percentage change in the price of a good or service is proportional to the percentage change in the quantity.
What is Unitary elastic demand?
When a change in the quantity supplied can happen without the market price having to increase as supply can increase without costs increasing and there is spare capacity to raise output.
What is perfectly price elastic supply?
An economic system that combines the planned and market economic system, with some resources being owned and controlled by private individuals and firms and others owned and controlled by the government in the public sector.
What is a mixed economy?
Products that generate negative externalities (spillover costs) to society yet are over-provided and over-consumed in a market economic system, such as tobacco, gambling, and junk food.
What are demerit goods?
A levy imposed on expenditure, i.e., it is a tax on the purchase or sale of a good or service.
What is an indirect tax?
Any product that is limited in supply, i.e., there is a finite quantity. Hence, there is an opportunity cost of producing or purchasing such goods
What is an economic good?
One of the factors of production that refers to the skills that business owners must have in order to run their businesses successfully.
What is enterprise?
Shows the potential or maximum combination of any two products that can be produced in an economy, at a particular point in time if all resources are used efficiently.
What is the production possibility curve (PPC)
A decrease in the quantity demanded for a good or service due to an increase in its price.
What is a contraction?
A diagrammatic representation of the relationship between price and quantity supplied.
What is a supply curve?
When the change in the price of the product has no influence on the quantity demanded.
What is perfectly price inelastic?
the extent to which the supply of a product changes following a change in its price.
What is price elasticity of supply (PES)?
an economic system that relies on the government (in the public sector) allocating resources
What is a planned economy?
The positive spillover effects of production or consumption enjoyed by those not directly involved in the buying or selling of a particular good or service, e.g., vaccinations, education, health care, training and development, research and development (R&D), and public parks.
What are external benefits or positive externalities?
A type of price control used by a government to set the price of a particular good or service with external benefits below the market equilibrium price.
What is a maximum price?
Any product that does not require any resources (factors of production) to make, so there is no opportunity cost involved.
What is a free good?
One of the factors of production that refers to the human resources (both physical and intellectual efforts) used in the production process.
What is labor?
The movement in an economy's PPC caused by an increase in the quantity and/or improvement in the quality of factors of production. This signifies a rise in the economy's production capacity.
What is a shift?
An increase in the quantity demanded for a good or service due to a reduction in its price.
What is an extension?
The situation that occurs when the demand for a good or service does not match the supply of the product.
What is market disequlibrium?
Measures the of quantity demanded for a good or service due to a change in its price.
What is price elasticity of demand (PED)?
The raw materials, components and finished goods (ready for sale) used in the production process.
What are stock or inventories?
The process by which prices adjust in response to changes in demand and supply, determining resource allocation in a market economy.
What is the price mechanism?
Refers to those who do not pay but are still able to benefit from the provision of a good or service once it is provided.
What is a free rider?
A form of price control that imposes a price set above the market equilibrium price in order to encourage consumption and increase the supply of a certain good or service.
What is minimum price?
The state or central authority for a country, responsible for the laws and operations of the economy as a whole.
What is government?
One of the factors of production that refers to the natural (non-manufactured) resources found on the planet that are used in the production process.
What is land?
The direction the PPC would shift if an economy experiences an increase in the quality and/or quantity of factors of production
Outwards
Goods or services that can be used in place of each other.
What are substititues?
The situation that occurs when the demand for a good or service does not match the supply of the product.
What is market equilibrium?
When consumers are not highly responsive to changes in the price of a good or service.
What is price inelastic demand?
Means that any percentage change in the price is matched by the same proportional change in the quantity supplied.
What is unitary price elastic supply?
Factor motivating individuals or firms to maximise their income or profits, often cited as a key feature in market economies.
What are incentives?
Products that generate benefits to society but are under-provided and under-consumed in a market economic system. They create external benefits to those not directly involved in production or consumption, such as education and healthcare.
What are merit goods?
The purchase of private sector assets and enterprises by the government, which turn the formerly private sector company into a state-owned enterprise in the public sector.
What is nationalisation?
Employees who produce goods and/or provide a service in return for wages, salaries, and other employment benefits.
What are workers?
The reward for using enterprise as a factor of production.
What is profit?
The direction the PPC shifts if an economy experiences a loss of resources (such as through war, natural disasters, or emigration), thereby reducing its overall productive capacity.
Inwards
Goods and services that are in joint demand, so customers purchase these together.
What are complements?
The situation when the demand for a product exceeds its supply. This is typically caused by the price being lower than the market equilibrium price.
What is a shortage?
Exists if the percentage change in the price of a good or service is proportional to the percentage change in the quantity.
What is unitary elastic demand?
Exists if firms find it difficult, if at all possible, to change supply following a change in the market price, i.e., supply is relatively unresponsive to a change in price.
What is price inelastic supply?
An economic system relies on the market forces of demand and supply (in the private sector) to allocate resources with minimal government intervention.
What is a market economy?
A single firm dominating the market for a particular good or service.
What is a monopoly?
The transfer (sale) of ownership and control of assets in the public sector to the private sector, thereby reducing the degree of public sector activity in the economy.
What is privatisation?