Factors of production – are resources and include land, labour, capital and enterprise
Scarcity – exists because resources are finite whereas wants are infinite
PPF – The maximum output for an economy when all its resources are fully and efficiently employed
Positive Statement - one that is based on fact / it can be tested as true or false
Normative Statement - one that is based on value judgement / it cannot be tested as true or false
Economic Growth – An Increase in real GDP
Opportunity Cost - the value of the next best alternative foregone
Division of Labour – Occurs when the work is split up into small tasks
PED – The responsiveness of demand for a good due to a change in its price
YED – The responsiveness of demand for a good due to a change in real income
XED – The responsiveness in demand for one good due to a change in price of another good.
PES – Price elasticity of supply is a measure of the responsiveness of the quantity supplied of a product due to a change in its price
GDP – The total amounts of goods and services produced in a country in one year.
Subsidy – A subsidy is a grant from the government which has the effect of reducing costs of production
Consumer Surplus - the difference between the price a consumer is prepared to pay for a good and the market price paid.
Producer Surplus – Producer surplus is the difference between the price suppliers are willing to supply at and the market price.
Indirect Tax – Indirect taxes are taxes on expenditure and include taxes such as Value Added Tax (VAT). Such taxes cause an increase in the cost of supply and so cause the supply curve to shift to the left.
Ad valorem tax- tax set as a percentage of the price of a good
Specific tax - a fixed charge imposed per a unit of good
Demand – refers to the amount…