Economics AS (UNIT1)

goods and services: goods are considered to be tangible products that we can touch and see but services are not tangible.

Economic welfare:the satisfaction an individual or society get from the allocation of resources.

Opportunity cost:the next best alternative forgone when an economic decision is made

Economic goods:Goods that are scarce and therefore have an oppurtunity cost.

Free goods: Goods that have no opputunity cost for example air

Factor market: the market for the factors of production that make other goods and services.

Renewable resources: resources that are able to be replenished over time

Profit: when total income or revenue is greater than totla costs

free market economy: an economy with very limited government involvement in providng goods and services

production posibility boundary: indicates the maximum possible output that can be achieved with a fixed set of resources and technology in a particular time period

productive efficiency: when a firm operated at minimum average cost, producing maximum possible output

allocative efficiency:when an economy cannot produce more of one good without porducing less of another

productivity: a measure of efficiency measuring the ratio of inputs to outputs

Human capital: the skills, abilities, motivation and knowlege of workers. improvements in human capital raises productivity and shifts the ppb to the right

division of labour: breaking down the production process into a sequence of tasks, with workers assigned to a particular task

specialisation: the production of goods which are limited due to an individual factor of production

value judgments: statements or oppinions that cannot be tested or verified and is highly dependent on personal views

normative statement: oppinions that require value judgments to be made

positive statements: statements which can be tested against data

Demand: the amount that consumers are willing and able to buy at each given price

Effective demand: demand supported by the ability to pay for the good or service

Market Demand: The total demand in a market for a good

Contraction in demand: fall in demand due to a rise in prices

Extension in demand: increase in demand caused by the fall of price

Normal goods: goods or services that will increase in demand when incomes rise

Inferior goods: goods or services that will decrease in demand when incomes rise

complementary products: goods which are consumed together

supply: the amount offered for sale at each given price level

planned supply: the amount producers plan to supply at a given price

actual supply: the amount they actually produce into the market, this differs from planned supply due to staff absences and breakdowns

Equilibrium: the price at which demand is equal to supply

Disequilibrium: when supply does not equal demand

Excess supply:

Market clearing price: the price where all goods that are supplied will be demanded

Price elasticity:

  when elasticity is 0=perfectly inelastic

                             1= Unitary price elasticity of demand 

                           +1= Price elsatic demand

cross price elasticity:

Investment good: A product that will increase in value over time

Market failure: where the market fails to produce what consumers require at the lowest possible cost

govenrment failure: when government intervention to correct market failure doesn't improve the allocation of resources and worsens the situation

Buffer stocks: an intervention system that aims to linit fluctuations of the price of a commodity

Economies of scale: when an increase in the scale of production leads to reductions in the average costs of firms

diseconomies of scale: Where an in crease in the scale of production leads to increases in average total costs for firm

competition: where there are large amounts of buyers and sellers

Monoploy: a market structure dominated by a single seller

Merit Good: a good that would be under-consumed in a free market as individuals don't know the benefits ontained by consumption

Demerit Good: a good that is over-consumes in a free market as it does more harm than good in which consumers are unaware

Public good: a good that possesses the characteristics of non-excludabilty and non rivalary in consumption

Free-rider problem: where some consumers benefit from other consumers purchasing the good

Quasi-public good: a good that has some qualities of a public good but does not fully possess non-rivalary and non-excludability

private good: a good that is both exludable and rivals in consumption

Indirect tax: a tax on spending

pollution permits: a permit sold to firms by the government, allowing them to pollute up to a certain limit.

law of unintended consequences: where the actions of consumers, producers and governments have effects that are unanticipated

inflation: a persistant increase in the level of prices