ECON1 Definitions 0.0 / 5 ? EconomicsECON1ASAQA Created by: nath77motCreated on: 01-03-15 21:51 Economic Activity The production of goods/services to satisfy needs & wants 1 of 36 Economic Problem We have infinite wants, but finite resources 2 of 36 Economic Incentives A cost/benefit that motivates consumer/producers into doing economic activity 3 of 36 Factors of Production The 4 different types of input available to be used in the production process 4 of 36 Opportunity Cost The next best alternative that you cannot do, as a result of a decision made 5 of 36 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 6 of 36 Free Good Goods which are unlimited in supply and therefore have no opportunity cost 7 of 36 Economic Good Goods which are scarce because their use has an opportunity cost 8 of 36 Positive (Economic) Statement A statement that can be proven to be right or wrong 9 of 36 Normative Statement A statement that cannot be proven to be right or wrong 10 of 36 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 11 of 36 Supply The willingness and ability of producers to supply goods/services to a market, at any given price, over a given period of time 12 of 36 Price Elasticity of Demand The responsiveness of quantity demanded to a change in price 13 of 36 Income Elasticity of Demand The responsiveness of quantity demanded to a change in income 14 of 36 Cross Elasticity of Demand The responsiveness of quantity demanded for one good to a change in price for another good 15 of 36 Price Elasticity of Supply The responsiveness of quantity supplied to a change in price 16 of 36 Composite Demand When a good is demanded for two or more distinct uses 17 of 36 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 18 of 36 Derived Demand When the demand for one good is the result of the demand for one good 19 of 36 Joint Demand When two or more complements are demanded and bought together 20 of 36 Producer Surplus Benefit gained by producer through market price being higher than the price that the producer is willing to supply it for 21 of 36 Consumer Surplus Benefit gained by the consumer through the market price being lower than the value placed on the good/service, by the consumer 22 of 36 Specialisation When one individual/region/country concentrates especially on making one good 23 of 36 Division of Labour Specialisation by workers 24 of 36 Economies of Scale When the expansion of a firm results in the unit cost starting to fall 25 of 36 Diseconomies of Scale When the expansion of a firm results in the unit cost starting to rise 26 of 36 Production The process of which converts the factors of production into the good/service which is offered 27 of 36 Market Failure When the free market fails to allocate resources to maximise social benefit/welfare 28 of 36 Public Good Good/Service which is non-excludable, non-rival and non-rejectable 29 of 36 Private Good Good/Services which is excludable, rival and rejectable 30 of 36 Externality Impact on a third party as a result of an economic decision 31 of 36 Positive Externality Externality where marginal social benefit exceeds marginal private benefit 32 of 36 Negative Externality Externality where marginal social cost exceeds marginal private cost 33 of 36 Merit Good A good/service of which's consumption gives off positive externalities, and are underconsumed and underprovided by society 34 of 36 Demerit Good A good/service of which's consumption gives off negative externalities, and are overconsumed and overprovided by society 35 of 36 Government Failure When government intervention doesn't fully correct the market failure 36 of 36
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