IB econ

factors of production

the economic resources (land, labour, capital, entrepreneurship)

land

natural resources/raw materials

labour

human work

capital

tools to make the product (machines, buildings, offices, trucks, computers)

entrepreneurship

combination of vision and will to help the company succeed

potential growth

shift of the ppc curve outward

demand

quantity of a product that a consumer is willing to buy at a certain price

determinants of demand

shift demand curve.

1. taste/preferences

2. price of complements or substitutes

3. number of consumers

4. income of consumers

5. future price expectations

inferior goods

demand for good decreases as people earn more income (knock-off or store-brands). negative YED value

superior goods

demand for good increases as people earn more income (luxury goods). positive high value

Price elasticity of demand

how much with qty demanded react to a change in price

elastic demand

shallow slope, PED>1, quantity demanded is heavily affected by price changes

inelastic demand

steep slop, 0<PED<1, quantity demanded is not that affected by price changes (cigarettes, alcohol)

Human Development Index indicators

measures economic development (quality of life).

1. life expectancy at birth

2. mean years of schooling for adults

3. expected years of school

4. GNI per capita

determinants of PED

1. number of closeness of substitutes

2. necessity of product

3. proportion of income spent on good

4. time period

income elasticity of demand (YED)

how much the qty demanded reacts to a change in income of consumers

determinants of supply

1. cost of factors of production

2. government intervention

3. price of related goods

4. expectations of future prices

5. changes in technology

6. weather or natural disasters

supply

willingness and ability of producers to produce a quantity of a good at a certain price