Economics key terms vacab

Ceteris Parabis

All other things being equal

Economic agents

An individual, group or organisation that makes decisions and influences the allocation of resources within an economy

Positive statement

A statement that is verifiable by data meaning that it can be checked and tested

Normative statement

is a statement that involves a value of judgement - opinions or beliefs

Opportunity cost

Measures that cost of a choice made in teams of the next best alternative forgone or sacrificed

Renewable resource

Natural resources that can be replenished

Non renewable resources

Natural resources that can be depleted

Abundant

Produced without sacrificing something else

Zero opportunity cost

• Cannot charge for it

• No cost to provide it

Production possibility frontiers (PPF)

• Shows the maximum possible output combinations of two goods goods and services a producer can achieve when all resources are fully efficiently employed

Allocative efficiency

Refers to making the best possible use of scarce resources to produce the combinations of goods and services that are optimal for society ; thus minimising resource waste.

Law of diminishing returns

If a FoP ( e.g labour) is increased whilst other FoPs remain fixed ( e.g. capital) then there will be a point where the additional output will eventually decline.

Dynamic efficiency

Occurs in the long run when a firm/ economy improves its quality/ quantity of FoPs, enabling it to expand production and lower its costs

Capital good

A durable good that is used to produce consumer goods. Expenditure = Investment (future)

Consumer good

A good produced to satisfy consumers’ needs and wants today using capital goods. Expenditure = Consumption (today)

Productivity

The output per FoP input over a time period

Division of labour

When tasks are divided amongst workers with each specialising in a production stage

Specialisation

A focus on a particular task by individuals/ firms/ countries

Barter system

When you trade one good or service for another one

Medium of exchange

Money can be used to trade goods/services, i.e. it supports specialisation and division of labour

Money

Anything that can be accepted as a means of payment

Measure of value

Refers to a common measure to value goods and services

Store of value

Means an assets’s “value” can be used now or in a future date

Inflation

A sustained increase in the average price level of an economy

Deferred payment

Allows money to be used to settle debts

Negative externalities

When the production or consumption of a good/service harms a third party

Public goods

Goods/services that are non-rivalrous and non-excludable

Merit goods

Goods/services that benefit society as well as the individual consuming them