Economics definitions

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Positive statements
Objective statements that can be tested or rejected by referring to the available evidence.
Normative statements
Express an opinion about what ought to be. They are subjective statements that carry value judgement.
Scarcity
Is the problem of people having unlimited wants but limited resources in the economy means that there are not enough resources to make all the goods and services we desire.
Non- Renewable Resources
Resources that will never be replaced once they are used e.g. coal, oil, copper.
Renewable Resources
Resources which can be used and replaced e.g. fish stocks, forests.
Sustainable resources
Types of renewable resources which can be economically exploited and which will not diminish and run out.
Opportunity Cost
is the value of the next best alternative foregone.
PPF Production Possibility Frontier
shows the combination of two or more goods that can be produced using all available resources efficiently.
Economic Growth
means that the economy has grown in size in terms of what is can produce i.e. its productive potential has increased; caused by an increase in the quantity or quality of an economy’s factors of production.
Specialisation
means the process by which individuals, firms and economies concentrate on producing those goods and services in which they have an advantage.
Division of Labour
the process whereby the production process is broken down into a sequence of stages with workers assigned to particular stages.
Free Market Economy
an economic system which resolves the basic economic problem through the market mechanism.
PlannedCommand Economy
an economic system which resolves the basic economic problem through the planning mechanism.
Mixed Economy
a mixture of a planned and a free enterprise economy. Resources are allocated by the government through the planning mechanism and by the private sector through the market mechanism.
Joint Demand
when an increase in demand for good X causes consumers to demand more of good Y. E.g. complements are goods in joint demand.
Competitive demand
when the demand for one good reduces the demand for another. E.g. Substitutes are goods in competitive demand.
Derived demand
when goods are demanded only because they are needed for the production of other goods.
Joint Supply
when an increase of supply of good X means more is automatically supplied of good Y.
Competitive supply
when an increase in price…

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