Economics Unit 1 definitions

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

Front

goods for which there is no opportunity cost

Back

Free goods

Card 3

Front

based on opinoins , including some value judgment

Back

Preview of the back of card 3

Card 4

Front

objective, based on opinion and testable theory

Back

Preview of the back of card 4

Card 5

Front

how to satisfy unlimited wants with scare resources

Back

Preview of the back of card 5
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