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Unit 1 Definitions

Positive Economics deals with objective or scientific explanations of the economy. Positive
statements are value free and can be proved or disproved.

Normative Economics attempts to describe what ought to be. Normative statements
contain a value judgement and they cannot be scientifically proved or disproved.

Free Goods…

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Demand is the quantity of a good or service that consumers are willing to buy at a given
price over a given time period.

Equilibrium occurs in the marketplace when quantity demanded exactly equals quantity
supplied. This is the price at which there is no tendency to change.

Consumer Surplus…

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Complement Goods are goods which are consumed together so the increase in the price of
one good leads to a fall in the demand for the other good. Therefore they have a negative

Price Elasticity of Supply (PES) is a measure of the responsiveness of quantity supplied
to a…

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QuasiPublic Goods possess some of the characteristics of public goods for some, but not
all of the time.

Buffer Stock Schemes intervene into the market to even out price fluctuations. An
intervention price is set and if the market price is different from this an intervention will take



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