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Economics "economic problem"
Effective demand: demand that is backed by the ability to pay.
Scarce resource: One in which demand at zero price would exceed the available supply.
Opportunity cost: The cost of the next best alternative, forgone (gave up) (e.g. time spent is time I could do
something else)
Factors of production: resources available to an economy
Economic problem:
What to produce?
(Consumers decide this
what we want)
How to produce? Allocating, scarce
(Firmsdecide how) resources between
competing uses.…read more

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Ceteris paribus: all things held constant. (Latin)
Demand: quantity of goods or services that will be bought at any given price over a period of time.
Supply: quantity of goods or services that will be supplied at any given price over a period of time.
Market system/mechanism:
This shows how the quantity
demanded, changes as the
price changes.
Determinates of demand:
Fashion and tastes.
A change in price will cause a movement along the possibility curve.…read more

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· Natural disaster.
· Person in chargeDestructs own economy
Government intervention:
Demerit goods: Merit goods:
Taxes Subsidies
Restrictions (age and other) Provide good/service
Informational advertising/ negative advertising Invest in merit goods
Educate Government spending
Legislation (change in) ( ban advertisements)
Import controls
Public goods:
1.) non excludeable
2.) non rival
1.) light house
2.) parks
3.) police
4.) street lights
5.) pavements
6.) defence
7.…read more

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Market mechanism: supply and demand
Quasi: mainly
Productive efficiency: produced at lowest cost (maximising output with a given input). Most out of
Allocative efficiency: resources used in the optimum way (what they are best at). Best use
Market failure: Where resources are inefficiently allocated due to imperfections in the working of the
market mechanism.
Optimum: social costs= social benefits
Market failure: social costs NOT = to social benefits
Externalities: effect on third parties of market transactions.…read more

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Effective demand: Demand that is backed by the ability to pay.
Scarce resource: One at which demand at zero price would exceed supply.
Opportunity cost: The cost of the next best alternative forgone.
Factors of production: Resources available to an economy.
Land- Natural resource
Labour- Human
Capital ­ Manufactured resource.
Entrepreneur ­ Organises and manages a business, assuming all risk for the sake of profit.
Economic good: Produced by using resources that has competing uses.…read more

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Inferior goods: Commodities that are less in demand as consumer income rises
Consumer sovereignty: It is the power of consumers to decide what gets produced
Marginal cost: Marginal cost is the change in total cost that arises when the quantity produced changes
by one unit.
Inequality: Uneven distribution.
Social disparity: Inequality between the rich and the poor.
Regressive: Decreasing proportionately with an increase in the tax base.
Public good: A good or service that is provided without profit for society collectively.…read more

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