Pearson Edexcel International GCSE (9-1) Economics: The Market System

Comprehensive vocabulary flashcards covering the core economic terminology from Chapters 1 to 8 of Pearson Edexcel International GCSE (9-1) Economics.

Basic Economic Problem

The allocation of a nation's scarce resources between competing uses that represent infinite wants.

Scarce Resources

The limited amount of resources available when demand is greater than supply.

Finite

Having an end or a limit.

Infinite

Without limits.

Needs

Basic physical requirements essential for human survival, such as water, food, warmth, shelter, and clothing.

Wants

People's unlimited desires for goods and services beyond their basic survival needs.

Allocate

To decide officially that a particular amount of money, time, or resources should be used for a particular purpose.

Factors of Production

The four economic resources used to produce goods and services: land, labour, capital, and enterprise.

Opportunity Cost

The cost of the next best alternative given up when making a choice.

Capital Goods

Goods purchased by firms and used to produce other goods, such as factories, machinery, tools, and equipment.

Consumer Goods

Goods purchased by households for direct consumption, such as food, confectionery, cars, tablets, and furniture.

Production Possibility Curve (PPC)

A line drawn on a graph that shows the different combinations of two goods an economy can produce when all resources are fully and efficiently used.

Economic Growth

An increase in the productive potential and level of output produced by a nation over time.

Rational Consumer

An individual assumed to make logical, thoughtful decisions with the goal of maximising personal satisfaction or benefit from consumption.

Maximise

To increase something, such as profit, satisfaction, or income, as much as possible.

Social Enterprise

A business organisation that operates commercially but aims primarily to maximise improvements in human or environmental well-being rather than private profit.

Retailer

A business that sells goods directly to individual members of the public rather than to other shops.

Effective Demand

The amount of a good or service people are willing to buy at given prices over a given period of time, supported by the ability to pay.

Demand Schedule

A table showing the quantity demanded of a good at different price levels, used to calculate expected quantities demanded.

Demand Curve

A line drawn on a graph that shows how much of a good or service buyers are willing and able to purchase at different price levels.

Inverse Relationship (Demand)

The negative relationship between price and quantity demanded where a rise in price causes demand to fall, and a fall in price causes demand to rise.

Shift in the Demand Curve

A movement to the left or right of the entire demand curve caused by a change in any non-price factor affecting demand.

Disposable Income

The amount of income available to an individual to spend or save over a period of time, after adding state benefits and deducting direct taxes.

Normal Goods

Goods for which demand increases when consumer income rises, and demand falls when income falls.

Inferior Goods

Goods for which demand falls when consumer income rises, and demand rises when consumer income falls.

Substitute Goods

Alternative goods that perform the same function, such that a price rise in one causes an increase in demand for the other.

Complementary Goods

Goods purchased and consumed together, such that an increase in the price of one leads to a decrease in demand for the other.

Demography

The study of human populations and the ways in which their size and structures change over time.

Infrastructure

The basic physical systems and structures that a country requires for economic activity to take place, including transport, communication, and power networks.

Supply

The amount of a good or service that producers are willing and able to offer for sale at different prices in a given period of time.

Supply Curve

A line drawn on a graph that shows the quantity of a good that sellers are willing to supply at different prices.

Proportionate Relationship (Supply)

The direct relationship between price and quantity supplied where an increase in price leads to an increase in supply, and a fall in price leads to a fall in supply.

Fixed Supply

A situation where it is impossible for suppliers to increase output even when the price increases, represented by a vertical supply curve.

Shift in the Supply Curve

A movement of the entire supply curve to the left or right resulting from a change in any condition of supply other than the price of the good itself.

Productivity

The rate at which goods are produced, defined by the amount of output produced relative to the work, time, and money needed to produce them.

Indirect Taxes

Taxes levied on expenditure on goods and services, such as VAT and duties on petrol or cigarettes.

Subsidy

Financial assistance paid by a government or organisation to reduce production costs and encourage greater supply of a particular good or service.

Equilibrium Price

The price level at which the quantity demanded by consumers equals the quantity supplied by producers, clearing the market.

Total Revenue

The total money received from selling goods or services, calculated using the formula: $\text{Total Revenue} = \text{Price} \times \text{Quantity}$.

Excess Demand

A state of market disequilibrium where the price is set below equilibrium, causing quantity demanded to exceed quantity supplied and creating shortages.

Excess Supply

A state of market disequilibrium where the price is set above equilibrium, causing quantity supplied to exceed quantity demanded and resulting in unsold stock.

Price Elasticity of Demand (PED)

A measure of the responsiveness of the quantity demanded of a good to a change in its price, calculated as: $\text{PED} = \frac{\%\,\Delta\text{ in Quantity Demanded}}{\%\,\Delta\text{ in Price}}$.

Inelastic Demand

A condition where a percentage change in price leads to a proportionately smaller percentage change in quantity demanded, such that $|\text{PED}| < 1$.

Elastic Demand

A condition where a percentage change in price leads to a proportionately larger percentage change in quantity demanded, such that $|\text{PED}| > 1$.

Perfectly Inelastic Demand

A condition where a change in price results in no change in the quantity demanded, represented by a vertical demand curve where $\text{PED} = 0$.

Perfectly Elastic Demand

A condition where consumers will buy all they can at an existing price, but demand falls to zero if the price rises, represented by a horizontal line where $\text{PED} = \infty$.

Unitary Elasticity

A condition where a change in price causes a proportionately equal change in quantity demanded, such that $\text{PED} = -1$ and total revenue remains constant at every price level.