Keywords for AS economics unit 1 Edexcel

A large list of most of the keywords needed in the exam, most useful for the justified multiple choice section.

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Economics
PPF
Production possibility curve shows the maximum output of two different
goods with the current resources.
Opportunity cost
the next best alternative foregone
Division of Labour/Specialisation
Division of Labour is the specialisation of workers in particular tasks
Positive Statements
Objective statements that can be tested to be factual
Normative Statements
Subjective statement that contains value judgement
Complementary goods
a good that is bought with another good
Substitute goods
a good that is bought instead of another good
PED
measures the sensitivity of demand to a change in price
Total revenue
quantity x price
XED
measures the responsiveness of demand of one good to the price change of
another
-complements have negative coefficients
-substitutes have positive coefficients
YED
measures the responsiveness of demand to a change in income

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Normal good: demand rises as income rises
-Inferior good: demand falls as income rises
PES
measures the responsiveness of supply to a change in price
Price Mechanism
system where changes in price help allocate goods and services efficiently
Consumer Surplus
the difference between what consumers are willing and able to pay for a good
and what they actually pay
Producer Surplus
the difference between what producers are willing and able to supply a good
for and the price they actually receive
Free market
price and…read more

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Derived demand
the demand for a factor of production resulting from the demand for a good
it is used in the production of
Market Failure
market failure occurs when the price mechanism fails to allocate resources
efficiently
Private cost
all cost which the supplies bears in producing the good
External cost (Negative Externality)
any cost imposed on a third party to an economic transaction
Social cost
the total cost to society of an economic transaction
Social cost = Private cost + External cost
Private Benefit…read more

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­ consumption by one individual does not reduce the
amount available for consumption by others
Information failure
when some or all of the participants of an economic exchange don't have
perfect knowledge
Geographical mobility
the ability and willingness of labour to move from one area to another
Occupational mobility
the ability and willingness of labour from changing their type of occupation to
find work
Minimum price
the price set on a good which the price cannot fall below
Maximum price
the price set on a…read more

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