Economics AS Unit 1 Definitions

HideShow resource information

Unit 1 Definitions

Scarce resources.

Resources that are limited or finite.

Opportunity Cost.

Cost expressed in terms of the next best alternative that is foregone.

Basic economic problem.

Resources are scarce but wants are unlimited.

Production possibility frontier.

A diagram that shows all the combinations of two goods that can be produced when all factors of production are being used.

Free good.

A good that has no opportunity cost.

 

Normative economic statement.

An economic statement that is based on a value judgement.

Positive economic statement.

An economic statement that can be tested in order to determine whether or not it is true.

Land.

Natural resources that are used for production.

Labour.

Human resources that are used for production.

Capital.

Manufactured goods that are used for production.

Enterprise (Entrepreneurship).

Risk taking in the production process.

Demand curve.

A demand curve shows how much people are willing and able to buy at each price.

Supply curve.

A supply curve shows how much suppliers are willing and able to supply at each price.

Complementary goods.

Goods or services that are frequently consumed together.

Substitute goods.

Goods or services that can be used instead of each other.

Price elasticity of demand.

A measure of the responsiveness of demand to a change in price.

Formula for price elasticity of demand.

% change in quantity demanded

         % change in price

Price elasticity of supply.

A measure of the responsiveness of supply to a change in price.

Formula for price elasticity of supply.

% change in quantity supplied

        % change in price

Income elasticity of demand.

A measure of the responsiveness of demand to a change in income.

Formula for income elasticity of demand.

% change in quantity demanded

          % change in income

Cross elasticity of demand.

A measure of the responsiveness of demand for one good to a change in the price of another good.

Formula for cross elasticity of demand.

% change in quantity demanded of good A

       % change in price of good B

Normal good.

A good that has a positive income elasticity of demand because  demand for it will increase as real incomes increase (and vice versa).

 

Inferior good.

A good that has a negative income elasticity of demand because demand for it will decrease as incomes increase (and vice versa).

 

Command Economy.

An economy in which what, how and for whom to produce are determined by a state planning process.

Free market economy.

An economy in which what, how and for whom to produce are determined through the forces of supply and demand without state intervention.

Mixed economy.

An economy in which what, how and for whom to produce are

Comments

Taku

thanks

Sushi

Thankyou!!

izzy

very helpful

Tess Creighton


briliant thank you

Similar Economics resources:

See all Economics resources »See all Competitive markets resources »