ECON1 Definitions

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  • Created by: nath77mot
  • Created on: 01-03-15 21:51
Economic Activity
The production of goods/services to satisfy needs & wants
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Economic Problem
We have infinite wants, but finite resources
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Economic Incentives
A cost/benefit that motivates consumer/producers into doing economic activity
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Factors of Production
The 4 different types of input available to be used in the production process
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Opportunity Cost
The next best alternative that you cannot do, as a result of a decision made
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Production Possibility Frontier
Curve which shows the maximum potential output of one good, given a level of output for all other goods in the economy
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Free Good
Goods which are unlimited in supply and therefore have no opportunity cost
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Economic Good
Goods which are scarce because their use has an opportunity cost
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Positive (Economic) Statement
A statement that can be proven to be right or wrong
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Normative Statement
A statement that cannot be proven to be right or wrong
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Demand
The number of people that have the willingness and ability to consume a good/service, at any given price, over a period of time
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Supply
The willingness and ability of producers to supply goods/services to a market, at any given price, over a given period of time
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Price Elasticity of Demand
The responsiveness of quantity demanded to a change in price
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Income Elasticity of Demand
The responsiveness of quantity demanded to a change in income
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Cross Elasticity of Demand
The responsiveness of quantity demanded for one good to a change in price for another good
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Price Elasticity of Supply
The responsiveness of quantity supplied to a change in price
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Composite Demand
When a good is demanded for two or more distinct uses
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Joint Supply
When two or more goods are produced together, so that a change in supply of one good will not necessarily change the supply of other goods
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Derived Demand
When the demand for one good is the result of the demand for one good
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Joint Demand
When two or more complements are demanded and bought together
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Producer Surplus
Benefit gained by producer through market price being higher than the price that the producer is willing to supply it for
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Consumer Surplus
Benefit gained by the consumer through the market price being lower than the value placed on the good/service, by the consumer
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Specialisation
When one individual/region/country concentrates especially on making one good
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Division of Labour
Specialisation by workers
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Economies of Scale
When the expansion of a firm results in the unit cost starting to fall
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Diseconomies of Scale
When the expansion of a firm results in the unit cost starting to rise
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Production
The process of which converts the factors of production into the good/service which is offered
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Market Failure
When the free market fails to allocate resources to maximise social benefit/welfare
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Public Good
Good/Service which is non-excludable, non-rival and non-rejectable
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Private Good
Good/Services which is excludable, rival and rejectable
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Externality
Impact on a third party as a result of an economic decision
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Positive Externality
Externality where marginal social benefit exceeds marginal private benefit
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Negative Externality
Externality where marginal social cost exceeds marginal private cost
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Merit Good
A good/service of which's consumption gives off positive externalities, and are underconsumed and underprovided by society
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Demerit Good
A good/service of which's consumption gives off negative externalities, and are overconsumed and overprovided by society
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Government Failure
When government intervention doesn't fully correct the market failure
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Other cards in this set

Card 2

Front

We have infinite wants, but finite resources

Back

Economic Problem

Card 3

Front

A cost/benefit that motivates consumer/producers into doing economic activity

Back

Preview of the back of card 3

Card 4

Front

The 4 different types of input available to be used in the production process

Back

Preview of the back of card 4

Card 5

Front

The next best alternative that you cannot do, as a result of a decision made

Back

Preview of the back of card 5
View more cards

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