Economics

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Economic Problem
How to allocate scarce resources among alternative uses
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Factor of Production
The resource inputs that are available in an economy fro the production of goods and services
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Land
Natural Resource,
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Labour
Human resource that is available in any economy. Quality of labour essential for economic growth
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Capital
Form of physical resource covering anything regarded as man made aid for production. combined to produce goods and services
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Entrepreneurship
Human capital,enterprise whereby factors organised to produce goods and services. Ability and inventiveness of individuals to take risks.
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Factor Endowments
The stock of factors of production, a poor country likely to have few or poor quality.
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Scarcity
A situation where there are insufficient resources to meet all wants
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Opportunity Cost
The cost of the next best alternative, which is forgone
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Specialisation
The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods.
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Division of Labour
The specialisation of labour where the production process is broken down into seperate tasks
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Division of Labour Positives
Increases output per worker (Productivity) because employees undertake just one part of the process. Makes products more price competitive, low labour and DOL.
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Production Possibility Curve
Shows the maximum quantities of different combinations of output of two products, given current resources and technology
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Un/Developed Economies
An economy with a high/low level of income per head
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Trade-Off
the calculation involved in deciding whether to give up one good for another
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Productive Potential
the maximum output that an economy is capable of producing
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Economic System
the way in which production is organised in a country or group of countries
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Market Economy
An economic system whereby resources are allocated through the market forces of demand and supply
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Price System
a Method of allocating resources by the free movement of prices
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Supply
The quantity of a product that producers are willing and able to provide at different market prices over a period of time
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Demand
The quantity of a product that consumers are able and willing to purchase at various prices over a period of time
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Household
Group of people whose spending decisions are connected
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Command Economy
An economic system in which most resources are state owned and allocated centrally
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Mixed Economy
An economic system in which resources are allocated through a mixture of the market and direct public sector involvement
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Price System
method of allocating resources through the free movement of prices
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Demand
The quantity of a product that consumers are able and are willing to purchase at various prices over a period of time
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Notional Demand
The desire for a product
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Effective Demand
The willingness and ability to buy a product
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Ceteris Paribus
Assuming other variables remain unchanged
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Demand Schedule
The data that is used to draw the demand curve for a product
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Movement along Demand Curve
This is in response to a change in the price of a product
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Consumer Surplus
The extra amount that a consumer is willing to pay for a product above the price that is actually paid
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Total Expenditure (By Consumers) (Total Revenue for Tour Operator)
= Price x Quantity Demanded
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Disposable Income
Income after taxes on income have been deducted and state benefits have been added
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Real Disposable Income
Income after taxes on income have been deducted and state benefits have been added and the result has been adjusted to take into account changes in price level
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Normal Goods
Goods which an increase in income leads to an increase in demand
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Inferior Goods
Goods for which an increase in income leads to a fall in demand
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Substitutes
Competing Goods
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Complements
Goods for which there is joint demand
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Change in Demand
where a change in a non-price factor leads to an increase or decrease in demand for a product
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Supply
the quantity of a product that producers are willing and able to provide at different market prices over a period of time.
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Supply Curve
This shows the relationship between the quantity supplied and the price of a product
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Supply Schedule
The data used to draw up the supply curve of a product
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Producer Surplus
The difference between the price a producer is willing to accept and what is actually paid
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Change in Supply
Occurs when a change in a non-price influence leads to an increase or decrease in the willingness of a producer to supply a product
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Equilibrium Price (Clearing Price)
The price where demand and supply are equal
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Equilibrium Quantity
Quantity that is demanded and supplied at the Equilibrium price
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Disequilibrium
Any position in the market where demand and supply are not equal
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Surplus
An excess of supply over demand
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Shortage
An excess of demand over supply
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Elasticity
The extent to which buyers and sellers respond to a change in market conditions
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Price Elasticity of Demand
The responsiveness of the quantity demanded to a change in the price of a product
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Price Elastic
Where the percentage change in the quantity demanded is sensitive to a change in price
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Price Inelastic
Where the percentage change in the quantity demanded is insensitive to a change in price
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Income elasticity of Demand
The responsiveness of demand to a change in income.
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Normal Goods
Goods with a positive income elasticity of demand
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Income inelastic
Goods for which a change in income produces a less than proportionate change in demand
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Income Elastic
Goods for which a change in income produces a greater proportionate change in demandtg
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Inferior Goods
Goods for which an increase in income leads to a fall in demand
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Cross elasticity of Demand
The responsiveness of demand for one product in relation to a change in the price of another
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Efficiency
where the best use of resources is made for the benefit of consumers
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Allocative efficiency
Where consumers satisfaction is maximised
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Productive efficiency
Where production takes place using the least amount of scarce resources
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Economic Efficiency
where both allocative efficiency and productive are achieved
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Inefficiency
Any situation where economic efficiency is not achieved.
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Free Market Mechanism
The system by which the market forces of demand and supply determine prices and the decisions made by consumers and firms
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Information failure
a lack of information resulting in consumers and producers making decisions that do not maximise welfare
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Asymmetric Information
Information not shared equally between two parties
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Externality
An effect whereby those not directly involved in taking a decision are affected by the actions of others
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Third Party
an effect whereby those not directly involved in taking a decision are affected by the actions of others
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Private costs
The costs incurred by those taking a particular action
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Private Benefits
The benefits directly accruing to those taking a particular action
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External Costs
The costs that are the consequence of externalities to third parties
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External Benefits
The benefits that accrue as a consequence of externalities to third parties
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Social Costs
The costs of a particular action
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Social Benefits
The total benefits of a particular action
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Negative externalities
This exists where the social cost of an activity is greater than the private
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Positive Externalities
This exists where the social benefit of an activity exceeds the private benefit
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Merit Goods
These have more private benefits than their consumers actually realise
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Demerit Goods
Their consumption is more harmful than is actually realised
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Public Goods
Goods that are collectively consumed and have the characteristics of non excludibility and non rivalry
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Non Excludability
Situation existing where individual consumers cannot be excluded from consumption
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Free Rider
Someone who directly benefits from the consumption of a public good but who does not contribute towards its provision
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Non-Rivalry
Situation existing where consumption by one person does not affect the consumption of all other
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Quasi Public Good
Goods having some but not all of the characteristics of a public good55
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Direct Tax
One that taxes the income of people and firms and that cannot be avoided
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Indirect Tax
A tax levied on goods and services
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Polluter Pays Principle
Any measure such as a green tax, whereby
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Subsidy
A payment, usually from government, to encourage production or consumption
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Tradable permits
A permit that allows the owner to emit a certain amount of pollution and that, if unused or only partially used, can be sold to another polluter
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Card 2

Front

The resource inputs that are available in an economy fro the production of goods and services

Back

Factor of Production

Card 3

Front

Natural Resource,

Back

Preview of the back of card 3

Card 4

Front

Human resource that is available in any economy. Quality of labour essential for economic growth

Back

Preview of the back of card 4

Card 5

Front

Form of physical resource covering anything regarded as man made aid for production. combined to produce goods and services

Back

Preview of the back of card 5
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