Principles of Economics - Final Examination Revision

A collection of vocabulary flashcards covering key concepts in Economics as per the lecture notes.

Economic problem

The issue arising from unlimited wants and limited resources.

Scarcity

A situation where human wants exceed the available resources.

Opportunity cost

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

Production Possibility Frontier (PPF)

A curve that illustrates the varying amounts of two products that can be produced when both depend on the same finite resources.

Ceteris paribus

A Latin phrase meaning 'all other things being equal', used to simplify analysis.

Elasticity of Demand (PED)

A measure of how much the quantity demanded of a good responds to a change in its price.

Income Elasticity of Demand (YED)

A measure of how much the quantity demanded of a good changes as consumer income changes.

Cross Elasticity of Demand (XED)

A measure of how much the quantity demanded of one good responds to a change in the price of another good.

Aggregate Demand (AD)

The total demand for all goods and services in an economy at a given overall price level in a given period.

Aggregate Supply (AS)

The total supply of goods and services available to a particular market from producers.

Macroeconomic equilibrium

The state where aggregate demand equals aggregate supply.

National income

The total monetary value of all goods and services produced in an economy over a period.

Economic growth

An increase in the total value of goods and services produced in an economy.

Factors of production

The resources used to produce goods and services, typically categorized as land, labor, and capital.

Normal Profit

The minimum profit necessary for a firm to remain in operation, equal to total costs.

Abnormal Profit

Any profit above the normal profit, which exceeds total costs.

Market equilibrium

A situation where the supply of goods matches demand.

Mixed economy

An economic system combining private and public enterprise.

Diminishing returns

A principle stating that adding more of one factor of production while holding others constant will eventually yield lower per-unit returns.

Long-run vs Short-run

Short-run involves at least one fixed factor, while long-run means all factors can change.