Economics SL Flashcards

Flashcards about Economics SL 2024-2025 Vivian Park Unit 1: Introduction to Economics, Scarcity, Resource allocation, Distribution of income, Factors of Production, Choices, Opportunity cost, Sustainability, Efficiency, Economic Well-being, Intervention, Economic system, Equity, Equality, Interdependence, Circular flow of income, Change and Economic way of thinking; Unit 2: Microeconomics including Demand, Supply, Competitive Market Equilibrium, The Price Mechanism , Price Elasticity of Demand, Income Elasticity of Demand, Price Elasticity of Supply, Subsidies and Taxation; and Unit 3: Macroeconomics including National Income Accounting, The Business Cycle, Aggregate Demand, Short-Run Aggregate Supply, The Monetarist/New Classical Model, The keynesian Model and Unemployment. Information was gathered from lecture notes.

What is Economics?

The study of how resources are allocated to satisfy the unlimited needs and wants of individuals, governments, and firms.

What is Scarcity?

Limited availability of economic resources relative to society’s unlimited demand for goods and services.

What is Resource allocation?

Assigning available resources, or Factors of Production, to specific uses chosen among alternatives.

What are Factors of Production?

Factors that allow an economy to produce its output, including land, labour, capital and enterprise.

What is Opportunity cost?

The value of the next best alternative that which is given up or sacrificed in order to obtain something else.

What is Sustainability?

Meeting the needs of the present without compromising the ability of future generations to meet their needs.

What is Efficiency?

All resources are put to their best use and there is no wastage.

What is Economic Well-being?

Level of prosperity and quality of living standards enjoyed by members of an economy.

What is Intervention?

Government getting involved to rectify perceived failure in markets.

What is Economic system?

Describes the way in which an economy is organised and run.

What is Equity?

Condition of being fair or just.

What is Equality?

State of being equal.

What is Interdependence?

Economic decision makers (economic agents) interact with and depend upon each other.

What is Circular flow of income?

A macroeconomic tool used to explain/model how economic activity and national income are determined.

What is Change?

The economic world is in a continual state of flux and economists must be aware of this.

What is Demand?

The various quantities of a product that consumers are willing and able to buy at different possible prices.

What is the law of demand?

As the price of a product increases, quantity demanded decreases.

What is Supply?

The various quantities of a product that sellers are willing and able to produce and sell at different possible prices.

What is the law of supply?

As the price of a product increases, quantity supplied increases.

What is Competitive Market Equilibrium?

When quantity supplied equals quantity demanded.

What is The Price Mechanism?

The means by which the forces of supply and demand determine the allocation of the economy’s scarce resources.

What is Allocative efficiency?

Using resources in order to produce the quantity of products most desired by consumers.

What is Elasticity?

The measure of a variable’s responsiveness to a change in another variable.

What is Price elasticity of demand?

Measure of the change in quantity demanded in comparison to change in price.

What is Income elasticity of demand?

Measure of the change in product demand in comparison to change in income.

What is Price Elasticity of Supply?

Measure of the change in quantity supplied in comparison to change in price.

What is a Price ceiling?

Legal maximum price set by government to make specific products affordable for all.

What is a Price Floor?

Legal minimum price set by government to provide income support for farmers and increase wages of low-skilled workers.

What are Subsidies?

Government assistance to individuals or groups, often payments made by government to firms as a fixed amount per unit of output.

What are Indirect Taxes?

Taxes imposed on spending to purchase goods and services that are paid to the government by the firm

What are common pool resources?

Any scarce resources that provides users with tangible benefits but which nobody in particular owns or has exclusive claim to.

What is an Externality?

A cost or benefit imposed on a third party who did not agree to incur that cost or benefit.

What are Positive externalities?

The advantages or gains of production or consumption to a third party.

What are Negative externalities?

The disadvantages or losses incurred from production or consumption by a third party not directly involved in an economic transaction.

What are Negative externalities of production?

External costs created by producers, even if the products aren’t consumed.

What are Negative externalities of consumption?

External costs created by consumers

What are Positive externalities of production?

External benefits created by producers

What are Positive externalities of consumption?

External benefits created by consumers

What is Macroeconomics?

Area of economics focused on the operation of the economy as a whole.

What is National income accounting?

The measurement of economic activity to determine total output.

What is Gross domestic product (GDP)?

Total value of all final goods and services produced in a country within a year

What is Gross national income (GNI)?

Total income earned by a country’s people and firms (FOP) no matter where they are located

What is Business cycle (trade cycle)?

Fluctuations in the level of aggregate output, usually expressed in GDP.

What is Aggregate Demand (AD)?

Total amount of real output wanted by all buyers at different price levels.

What is Aggregate Supply (AS)?

Total amount of real output produced in an economy at different price levels

What is Short-run aggregate supply (SRAS)?

Occurs as long as resource prices (cost of factor inputs) are inflexible

What is Long-run aggregate supply (LRAS)?

Output that an economy can produce when full employing its factors of production

What is the AD-AS Model?

Model that explains price level and output through the relationship of AD and AS

What is Short-run macroeconomic equilibrium?

A condition in the economy in which the quantity of AD equals the quantity of AS.

What is an Inflationary gap?

Exists when actual national output exceeds the full employment level of output

What is Deflationary gap?

Exists when the real national output equilibrium is below the full employment level of output

What is The Keynesian Model?

Based on the work of John Maynard Keynes, it challenges the classical view that the economy is always moving towards full employment equilibrium.

What is Unemployment?

Idle resources or disequilibrium where some potential workers cannot find jobs

What is the Unemployment rate?

Measures number of people officially unemployed as a percentage of a country’s total workforce