Economics Y11 T1 W4

Economic Problem

The decisions made to fulfill unlimited needs and wants with limited resources, creating scarcity.

Main Economic Agents

The three main decision makers in an economy: Government, Firms, and Individuals/Households.

Scarcity

The condition arising because resources are limited, preventing all needs and wants from being satisfied.

Basic Economic Questions

What will be produced? How will it be produced? For whom will it be produced?

Goods vs. Services

Goods are tangible items (e.g., pens), while services are non-tangible products (e.g., healthcare).

Needs vs. Wants

Needs are essential for survival, while wants are desires that are not necessary for survival.

Economic Goods

Goods that are limited in supply and scarce in relation to demand (e.g., oil, cars).

Free Goods

Goods that are unlimited in supply and available for everyone to use (e.g., air), with no opportunity cost.

Ceteris Paribus

A Latin phrase meaning 'all other factors remain unchanged'.

Price Elasticity of Demand (PED)

The responsiveness of quantity demanded to a change in price.

Law of Demand

Higher price leads to lower quantity demanded; lower price leads to higher quantity demanded.

Normal Goods

Goods for which demand increases as consumer income increases.

Inferior Goods

Goods for which demand decreases as consumer income increases.

Derived Demand

Demand for a good that results from the demand for another good.

Factors of Production

The resources used to produce goods and services: Land, Labor, Capital, and Enterprise.

Opportunity Cost

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

Production Possibility Curve (PPC)

A graph showing the maximum potential output of two goods in an economy.

Elastic vs. Inelastic Demand

Elastic demand (PED > 1) means quantity demanded changes more than price; inelastic demand (PED < 1) means quantity demanded changes less than price.

Market Economy

An economic system characterized by private enterprise and minimal government intervention.

Command Economy

An economic system where the central government plans and controls all economic activities.

Mixed Economy

An economic system that incorporates elements of both market and command economies.

Dynamic Pricing

Pricing strategy where prices are adjusted based on current market demands.

Positive vs. Normative Statements

Positive statements are objective and can be tested, while normative statements are subjective and based on opinions.

Primary Commodities

Raw materials produced from natural resources without manufacturing processes.

Manufactured Goods

Products created by processing raw materials into finished goods.

LEDC vs. MEDC

LEDC (Less Economically Developed Countries) often compete with MEDC (More Economically Developed Countries), which have more advanced technology.