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Key Terms Unit 1 AS Economics

Scarcity ­ insufficient resources to provide for everyone's wants. Resources are finite compared to
human wants.

Normative statements ­ statements with a valid judgment, e.g. .... In statement 1/2

Positive statements ­ statements with data backed up, e.g. ... in statement 1/2

Opportunity cost…

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%change in Quantity supplied / %change in price

Elasticity >1, good is ELASTIC
Elasticity <1, good is INELASTIC
Elasticity =1, UNIT ELASTIC
Elasticity is infinite, PERFECTLY ELASTIC

Total revenue = price x quantity sold

Price mechanism ­ by which resources are allocated in a market economy


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Minimum price scheme ­ the Gov. can set a legally imposed mini. Price in a market which the
normal market price cannot fall

Market failure ­ occurs when market imperfections lead to an allocation of resources which is less
efficient than it might be

Government failure ­ occurs when gov.…


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