Economics Section A definitions

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Market
A set of arrangements allowing buyers and sellers to communicate and exchange goods and services.
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Product market
Markets selling goods and services from which consumers derive utility (benefit).
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Commodity market
Markets selling raw materials or minerals used in the production of other goods and services.
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Labour market
Markets selling labour time used in the production of goods and services.
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Supply
The amount of a good that sellers are prepared to sell at given prices over a period of time.
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Demand
The amount of a good that will be bought at given prices over a period of time.
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Price
The amount of money that goods are exchanged for in a transaction
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Exporters
Firms that sell overseas
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Effective demand
A want backed up the the ability to pay
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Normal good
A good for which demand will rise if income rises and fall if income falls.
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Inferior good
A good for which demand will fall if income rises or rise if income falls.
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Fixed supply
The amount of supply is fixed (the supply curve is vertical).
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Indirect tax
Taxes imposed by the government on spending.
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Market equilibrium
Where the supply of a good or service exactly equals its demand in a market.
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Excess supply
Where supply is greater than demand and there are unsold goods in the market.
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Excess demand
Where demand is greater than supply.
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Price elasticity demanded
The responsiveness of quantity demanded for a good to change in price
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Elastic demand
A change in price results in a proportionally greater change in demand
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Inelastic demand
A change in price results in a proportionally smaller change in demand
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Price elasticity of supply
The responsiveness of supply for a good to a change in price.
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Elastic supply
A change in price results in a greater change in supply
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Inelastic supply
A change in price results in a proportionally smaller change in supply
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Income elasticity of demand
The responsiveness of demand to a change in income.
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Real income
The spending power of income- the amount of goods and services which can be purchased with one’s normal income.
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Elastic income
When the YED is more than 1 or less than -1. Meaning that the % change in quantity demand is more than the % change in real income.
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Inelastic income
When the YED is in between +1 and -1. Meaning that the % change in quantity demand is less than the % change in real income.
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Luxury good
Luxury goods are products that people want but don’t need. Consumers will only buy them if they can afford them because they are a discretionary good. This means that if there is a decrease in income, demand would fall because people will stop purcha
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Necessity good
Necessities are goods that people need, so even if income falls, people will have to continue buying the necessity goods. This means that necessities are YED inelastic.
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Discretionary expenditure
Non-essential spending or spending that is not automatic
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Unitary elasticity
Where price elasticity of demand for a product is equal to 1. For such a product total revenue is exactly the same at all prices. Unitary demand curves are curved.
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Finite resources
Resources that will eventually run out
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Scarce resources
The amount of resources available is limited.
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Basic economic problem
Allocation of a nation’s scarce resources between competing uses that represent infinite wants.
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Opportunity cost
When choosing between different alternative is the benefit lost from the next best alternative. For example, if a company has $10000 dollars to spend on either advertising or training the workforce. If they chose to spend it on training the workforc
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Production possibility curve
A line which shows the different combinations of two goods an economy can produce if all resources are used up.
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Economy
A system that attempts to solve the basic economic problem.
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Public sector
Government organisations that provide goods and services in an economy.
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Private sector
The provision of goods and services by businesses that are owned by individuals or groups of individuals.
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Public goods
Goods that are not likely to be provided by the private sector.
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Merit goods
Goods which are under-provided by the private sector
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A mixed economy
An economy where goods and services are provided by both the private and the public sectors.
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Efficiency
Minimising cost and the use of resources
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Market failure
Where markets lead to inefficiency.
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Labour
The people available for work in a country represent the working population.
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Working population
Those people who are in work or seeking work
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Specialisation
The production of a limited range of goods by individuals, firms, regions or countries.
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Division of labour
The breaking down of the production process into smaller parts with each worker allocated to a specific task.
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Demand for labour
The quantity demanded of labour at a given wage rate.
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Supply of labour
The quantity supplied of labour at a given wage rate.
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Wage rate
The amount of money paid to workers for their services over a period of time
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Derived demand
Demand that arises because there is demand for another good.
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Minimum wage
A minimum amount of money per hour which most workers are entitled to be paid.
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Trade unions
Trade unions are organisations that exist to protect the interests of workers.
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Other cards in this set

Card 2

Front

Product market

Back

Markets selling goods and services from which consumers derive utility (benefit).

Card 3

Front

Commodity market

Back

Preview of the front of card 3

Card 4

Front

Labour market

Back

Preview of the front of card 4

Card 5

Front

Supply

Back

Preview of the front of card 5
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