Economics Unit 1 definitions 3.0 / 5 based on 1 rating ? EconomicsdefinitionsASAQA Created by: P GREENWOODCreated on: 02-01-14 17:45 Opportunity cost The really cost of the next best alternartive foregone 1 of 29 Free goods goods for which there is no opportunity cost 2 of 29 Normative statements based on opinoins , including some value judgment 3 of 29 Positive statements objective, based on opinion and testable theory 4 of 29 The economic problem how to satisfy unlimited wants with scare resources 5 of 29 Factors of Production Four Inputs ( Land , Labour, Capital and Enterprise) needed to produce a goods or services 6 of 29 Planned Economy Economy were all economic decisions are made by the government 7 of 29 Market Economy Economy were all economic decisions are made by the market 8 of 29 Mixed Economy economy were different stakeholder are involved in making decision such as government, charities and companies. 9 of 29 Production possibility Frontier (PPF) the maximum combination of different goods that an economy can produce 10 of 29 Demand The amount of goods and services consumers have the willingness and ability to purchase 11 of 29 Consumer Surplus consumer are able to buy a product for less than they would be willing to pay 12 of 29 Supply The amount of goods and services produces have the willingness and ability to put on the market 13 of 29 Producer Surplus supplier receive more for their goods than they would have been willing to accept. 14 of 29 Equilbrum Price a price at which demand is equal to supply (market clearing price) 15 of 29 Price elasticity of demand proportion change in quantity demanded in response to a change in price 16 of 29 Relatively elastic demand as price rises, quantity demanded fall by proportionately more 17 of 29 Relatively inelastic as price rises, quantity demanded fall by proportionately more 18 of 29 Income elasticity of demand the proportionate chnage in quantity demanded in response to a change in real disposable income 19 of 29 Normal Goods when income increases QD goes up YED is greater than 0 20 of 29 Inferior goods when income increases QD goes down YED is less than 0 21 of 29 Superior goods Sensitive to change in price so QD changes by proportionaly more YED is more than 1 22 of 29 Cross elasticity of demand a measure of response of demand of increase QD of good A in response to a % change in good B 23 of 29 Substitute goods occurs when large choice between goods (positive XED) 24 of 29 Complementary goods where both must be had to derive full satisfaction (Negative XED) 25 of 29 Independent goods goods which have XED equal to 0 26 of 29 Price elastcity of demand is the proportionate change in QS in response to a change in price 27 of 29 Relatively elastic supply the proportionate change in qs is greater than the change in price (PES is greater than 1) 28 of 29 Relatively inelastic supply the proportionate change in qs is less than the change in price (PES is less than 1) 29 of 29
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