EDEXCEL IAL Economics Unit 01: Markets in Action

A comprehensive set of flashcards covering key definitions and concepts from the lecture notes on Economics, particularly focusing on Unit 01: Markets in Action.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' which is used in economics to isolate the effect of one variable by assuming that other variables remain constant.

Positive Statement

An objective statement that can be tested and validated with factual evidence.

Normative Statement

A statement based on opinions or value judgments rather than factual evidence.

Scarcity

The limited availability of resources relative to unlimited wants, leading to the necessity for choice and the concept of opportunity cost.

Opportunity Cost

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

Production Possibility Frontier (PPF)

A graph that shows the maximum feasible quantity of two goods that a country can produce with available resources.

Specialisation

The process of focusing on the production of a limited range of goods to increase efficiency.

Division of Labour

The breaking down of a production process into finer tasks assigned to different workers to increase efficiency.

Role of Money

Money serves as a medium of exchange, a measure of value, a store of value, and a standard for deferred payment.

Free market economy

Run by private individuals and firms, using price mechanism. Example: Silicon Valley

Mixed economy

The mixed economy refers to the instance where both private sector, owned by private individuals or firms and the government jointly manages and run the economy. This would involve consumer goods provided by the private sector and public and merit goods and services provided by the government. Example: India, US, France

Command/planned economy

Run by the state/government, who plans on how the economy should operate. Example; North Korea

Market Equilibrium

The point in a market where the quantity demanded equals the quantity supplied, leading to a stable market price.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between the price producers are willing to accept and the actual price they receive for their goods.

Price Elasticity of Demand (PED)

A measure of the responsiveness of the quantity demanded to a change in price.

Price Elasticity of Supply (PES)

A measure of the responsiveness of the quantity supplied to a change in price.

Excess Demand

A situation where the quantity demanded exceeds the quantity supplied at a given price.

Excess Supply

A situation where the quantity supplied exceeds the quantity demanded at a given price.

Market Failure

Occurs when the allocation of goods and services by a free market is not efficient, often leading to negative outcomes such as underproduction or overproduction of goods.

Externalities

Costs or benefits of a transaction that affect third parties who are not involved in the transaction.

Public Goods

Goods that are non-rivalrous and non-excludable, typically provided by the government because the private market would not supply them efficiently.

Government Failure

A situation where government intervention to correct market failure leads to inefficient outcomes and a loss in economic welfare.