Econ

What is scarcity?

The basic economic problem that resources are limited while human wants are unlimited.

What are the factors of production?

Land, labour, capital and enterprise.

What is opportunity cost?

The value of the next best alternative forgone when making a choice.

What is a free good?

A good that is not scarce and has no opportunity cost.

What is a consumer?

An individual or organisation that purchases goods and services.

What is a producer?

An individual or organisation that creates goods or services.

What is utility?

The satisfaction or benefit a consumer receives from consuming a good or service.

What is specialisation?

Concentrating production on a particular task, product or industry.

What is division of labour?

Splitting production into separate tasks performed by different workers.

What is productivity?

The amount of output produced per unit of input.

What is efficiency?

Producing the maximum possible output from available resources.

What is productive efficiency?

Producing at the lowest possible average cost.

What is allocative efficiency?

When resources are allocated according to consumer preferences, generally where price equals marginal cost.

What is a market?

A system through which buyers and sellers interact to exchange goods and services.

What is demand?

The quantity of a good or service consumers are willing and able to buy at a given price.

What is supply?

The quantity of a good or service producers are willing and able to sell at a given price.

What is equilibrium price?

The price at which quantity demanded equals quantity supplied.

What is excess demand?

When quantity demanded exceeds quantity supplied at a particular price.

What is excess supply?

When quantity supplied exceeds quantity demanded at a particular price.

What is a substitute?

A good that can be consumed instead of another good.

What is a complement?

A good consumed together with another good.

What is a normal good?

A good for which demand increases as consumer income increases.

What is an inferior good?

A good for which demand decreases as consumer income increases.

What is price elasticity of demand (PED)?

The responsiveness of quantity demanded to a change in price.

What is price elasticity of supply (PES)?

The responsiveness of quantity supplied to a change in price.

What is income elasticity of demand (YED)?

The responsiveness of demand to a change in consumer income.

What is cross elasticity of demand (XED)?

The responsiveness of demand for one good to a change in the price of another good.

What is a public good?

A good that is non-rivalrous and non-excludable.

What is a private good?

A good that is both rivalrous and excludable.

What is a merit good?

A good that is under-consumed because consumers may underestimate its benefits.

What is a demerit good?

A good that is over-consumed because consumers may underestimate its costs.

What is a positive externality?

A benefit to a third party arising from consumption or production.

What is a negative externality?

A cost imposed on a third party arising from consumption or production.

What is market failure?

When the free market fails to allocate resources efficiently.

What is asymmetric information?

When one party in a transaction has more or better information than another.

What is a government intervention?

An action taken by the government to influence economic activity.

What is a subsidy?

A payment from the government to reduce producers’ costs or encourage production/consumption.

What is an indirect tax?

A tax imposed on spending or consumption rather than directly on income or wealth.

What is a price ceiling?

A legal maximum price that can be charged for a good or service.

What is a price floor?

A legal minimum price that can be charged for a good or service.

What is elasticity?

A measure of how much quantity demanded or supplied responds to changes in price.

What is elastic?

Demand or supply that responds significantly to price changes.

What is inelastic?

Demand or supply that responds little to price changes.

What is unitary elasticity?

When the percentage change in demand or supply is equal to the percentage change in price.

What is total revenue?

The total income generated from the sale of goods and services.

What is incidence of taxation?

The division of the burden of a tax between buyers and sellers.

What is a competitive market?

A market with many buyers and sellers where price is determined by supply and demand.

What is market power?

The ability of a firm to influence the price of a good or service.

What are barriers to entry?

Obstacles that make it difficult for new firms to enter a market.

What are economies of scale?

Cost advantages that businesses obtain due to their scale of operation.

What are diseconomies of scale?

Increased per-unit costs that a firm experiences when it becomes too large.

What is a natural monopoly?

A market structure where a single firm can produce at a lower cost than multiple firms.

What is a monopoly?

A market structure with a single producer or seller for a product.

What is an oligopoly?

A market structure dominated by a few large firms.

What is monopolistic competition?

A market structure with many firms selling similar but not identical products.

What is perfect competition?

A market structure where many firms offer a homogeneous product.

What is macroeconomics?

The branch of economics studying the behavior of an economy as a whole.

What is economic growth?

An increase in the production of goods and services over a certain period.

What is real GDP?

Gross Domestic Product adjusted for inflation.

What is nominal GDP?

Gross Domestic Product measured at current market prices without adjustment for inflation.

What is GDP per capita?

Gross Domestic Product divided by the population.

What is inflation?

The rate at which the general level of prices for goods and services is rising.

What is deflation?

A decrease in the general price level of goods and services.

What is unemployment?

The situation when individuals who are able and willing to work are not able to find work.

What is the balance of payments?

A record of all economic transactions between residents of a country and the rest of the world.

What is the current account?

A component of the balance of payments that includes trade in goods and services, income, and current transfers.

What is fiscal policy?

Government policy regarding taxation and spending to influence the economy.

What is monetary policy?

The process by which the monetary authority manages money supply to achieve specific goals.

What is supply-side policy?

Policies aimed at increasing the productive capacity of the economy.

What is aggregate demand?

The total demand for goods and services within a particular market.

What is aggregate supply?

The total supply of goods and services that firms in an economy plan to sell during a specific time period.

What is consumption?

The use of goods and services by households.

What is investment?

Expenditure on capital goods that will be used for future production.

What is government spending?

Total government expenditures on goods and services.

What are net exports?

Exports minus imports.

What is the multiplier?

The ratio of change in national income to the change in government spending.

What is MPC?

Marginal Propensity to Consume; the proportion of additional income that is spent on consumption.

What is MPS?

Marginal Propensity to Save; the proportion of additional income that is saved.

What is the accelerator?

A concept in economics that describes how investment levels change in response to changes in demand.