Key words & Definitions ECON 1

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Demand
The quantity of a good that the consumer is willing and able to buy at a certain price at a given time
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Supply
The quantity of a good that the producer is willing and able to produce onto the market at a given time
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Demand curve
A line on a graph that shows the correlation between the price of thee good and the how much will be demanded at that given time
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Supply Curve
A line in a graph that shows the correlation between the price of a good and how many the producer can export at that given time
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Equilibrium
The point at which there is no need to change the price because it is 'at rest'
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Excess Demand
The difference between the quantity supplied and the higher quantities demanded when the price is below the equilibrium price
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Excess Supply
This is when the supply is above the demand and so there are unsold goods, surpluses provide a downward pressure
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Price elasticity of demand
The responsiveness of demand for a product following a change in in its own price
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Elasticity of supply
Price elasticity of supply measures the relationship between the change in quantity and the change in price
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Elastic Demand
Demand where the price elasticity is + 1
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Elastic supply
Supply where the price elasticity is + 1
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Inelastic Demand
Demand where the price elasticity is less than +1
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Inelastic supply
Supply where the price elasticity is less than +1
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Inferior good
When the demand for a good will decrease when real income increases
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Market Equilibrium
This is the state of equality between the demand and supply, without a shift in the demand or supply, there will be no change in the market price
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Normal goods
Have a positive income elasticity of demand and necessities have an income elasticity of 0 to +1. Luxuries have an income elasticity of >+1 demand rises more than proportionate to change in income.
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Positive statement
Objective statements that can be tested or rejected by referring to the available sources. Positive economics deals with objective explanation
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Free market
The forces of supply and demand will determine the price and output with no government intervention, they are completely unregulated
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Complement
Are in joint demand
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Buffer Stock
Stabilize the market prices of agricultural products by buying up the supplies of the product when harvests are plentiful selling stock to the market when supplies are low
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Disequilibrium
A situation where the demand and supply is imbalanced and there is a tendency for change
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Consumption
To buy and consume goods to satisfy wants
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Opportunity cost
The cost of a choice of the next best alternative
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Specialisation
Where a business will only produce a limited range of goods to increase productive efficiency
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Value judgement
The view of rightness or wrongness of something based on a personal view
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Substitutes
Goods in competitive pricing that can act as a replacement for another product
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Subsidy
Payments by the government to suppliers to reduce their costs. The effect of a subsidy is to increase supply and reduce the market equilibrium price
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Finite resources
Finite workers, resources, land, machines, etc... Producing more could cause disaster to the natural world and could run out
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Other cards in this set

Card 2

Front

The quantity of a good that the producer is willing and able to produce onto the market at a given time

Back

Supply

Card 3

Front

A line on a graph that shows the correlation between the price of thee good and the how much will be demanded at that given time

Back

Preview of the back of card 3

Card 4

Front

A line in a graph that shows the correlation between the price of a good and how many the producer can export at that given time

Back

Preview of the back of card 4

Card 5

Front

The point at which there is no need to change the price because it is 'at rest'

Back

Preview of the back of card 5
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