Australia's Economy: Market System and Key Concepts

Vocabulary flashcards covering key terms from the lecture notes on Australia’s modified market economy, consumer sovereignty, price mechanism, PPC, elasticity, and economic systems.

Regulation

A process of imposing government laws and rules on a market to influence how it operates.

Deregulation

The removal of government laws and rules imposed on a market to reduce restrictions.

Private goods

Goods or services produced by the private sector for individual consumption (excludable and rivalrous).

Public goods

Goods or services provided by the government for societal use and benefit (non-excludable and non-rival; often underprovided by markets).

Market economy

An economy in which prices and production are determined by private decisions driven by profit and consumer demand; characterized by private property and market pricing.

Mixed economy

An economy with both private enterprise and government intervention; some regulation and public provision of goods and services.

Consumer sovereignty

The idea that consumers’ spending decisions determine what is produced in the economy.

Price mechanism

The system by which prices adjust to balance supply and demand, signaling what to produce and influencing incentives.

Demand

The quantity of a good or service that buyers are willing and able to purchase at a given price in a specific period.

Supply

The quantity of a good or service that producers are willing and able to offer for sale at a given price in a specific period.

Equilibrium

The price and quantity at which quantity demanded equals quantity supplied.

Substitutes

Goods that can replace each other; an increase in the price of one tends to increase demand for the other.

Complements

Goods that are often used together; a fall in the price of one can increase demand for the other.

Opportunity cost

The value of the next-best alternative foregone when a choice is made.

Production Possibility Curve (PPC)

A graph showing the maximum feasible combinations of two goods given available resources and technology.

PPC frontier

The boundary on the PPC representing the maximum feasible production; points inside are inefficient, above are not feasible.

Factors of production

Resources used to produce goods and services: land, labour, capital, and enterprise.

Land

Naturally occurring resources used in production (minerals, water, vegetation, etc.).

Labour

Human effort used in production (physical and mental).

Capital

Human-made resources used to produce goods and services (tools, machinery, buildings, etc.).

Enterprise

The ability to initiate and manage the production process; entrepreneurial initiative and risk. Generates profits.

Allocative efficiency

Using resources in a way that maximizes the benefits to consumers and the nation.

Productive (technical) efficiency

Producing the maximum output possible with given resources.

Scarcity

Limited resources relative to unlimited wants, necessitating choices and prioritization.

Monopoly

A market with a single seller that can influence prices and reduce competition.

Demand curve

A graph showing the relationship between price and quantity demanded; typically downward-sloping.

Supply curve

A graph showing the relationship between price and quantity supplied; typically upward-sloping.

Price elasticity of demand (PED)

A measure of how responsive quantity demanded is to a price change; calculated as the percent change in quantity divided by the percent change in price.

Elastic demand

Demand that is highly responsive to price changes (elastic >1 in absolute value).

Inelastic demand

Demand that is relatively unresponsive to price changes (elastic <1 in absolute value).

Price elasticity of supply (PES)

A measure of how responsive quantity supplied is to a price change.

Ceteris paribus

Latin for 'all other things being equal'; the assumption used to simplify analysis by holding other factors constant.