IGSCE ECONOMICS ALL DEFINITIONS

resources

factors used to produce goods and services

The economic problem

unlimited wants exceeding finite resources

Scarcity

a situation where there is not enough to satisfy everyone's wants

economic good

a good which requires resources to make and therefore has an opportunity cost

free good

a good which does not require any resources to make and does not have an opportunity cost (gift of nature)

labour force

people in work and people seeking work

productivity

the output per factor per production in an hour

production possibility curve

a curve that shows the maximum output of two types of products and a combination of those products that can be produced with existing resources and technology

mixed economic system

an economy in which both the private and the public sector play an important role

market economic system

an economic system where consumers determine what is produced, resources are allocated by price mechanism and land and capital are privately owned.

price mechanism

the system by which market forces of demand and supply determine prices

market equilibrium

a situation where demand and supply are equal at the current price

market disequilbrium

a situation where demand and supply are not equal at the current price

demand

the willingness and ability to buy a product at a given price

extension in demand

a rise in the quantity demanded caused by a fall in product price

contraction in demand

fall in the quantity demanded caused by a rise in product price

increase in demand

a rise in demand AT ANY GIVEN PRICE causing demand curve to shift to the right

decrease in demand

a fall in demand AT ANY GIVEN PRICE causing demand curve to shift to the left

substitute goods

a product that can be used in place of another

complement goods

a product that is used along with another product

supply

the willingness and ability to sell a product at any given price

extension in supply

a rise in the quantity supplied caused by a fall in the product price

contraction in supply

a fall in quantity supplied caused by a rise in product price

increase in supply

a rise in supply AT ANY GIVEN PRICE causing the supply curve to shift to the right

decrease in supply

a fall in supply AT ANY GIVEN PRICE causing the supply curve to shift to the left

direct tax

taxes on income and wealth of individuals and firms

indirect tax

taxes on goods and services

PED

a measure of the responsiveness of the quantity demanded to change in price

PES

a measure of the responsiveness of a quantity supplied to a change in price

elastic

when quantity demanded/supplied changes by a greater percentage than the change in price

inelastic

when the quantity demanded/supplied changes by a smaller percentage than the change in price

perfectly elastic

when a change in price caused a complete change in demand / supply

perfectly inelastic

when a change in price has no effect on quantity demanded/ supplied

market failure

market forces resulting in an inefficient allocation of resources

social benefit

total benefits to the society due to an economic activity

social costs

the total costs to a society due to an economic activity

private benefit

benefits received by those directly consuming or producing a product

private costs

costs made by those directly consuming or producing a product

external benefit

benefits enjoyed by those who are not directly involved in consuming and producing goods

external costs

costs imposed on those who are not directly involved in the consumption and production of goods

merit goods

goods that are beneficial to society but consumers may under consume as they do not fully recognise the private or external benefits

demerit goods

goods which have harmful impacts on consumers/society

public good

a non-rival, non-excludable good that is financed by taxes

private goods

a product which is both rival and excludable

price fixing

when two or more firms agree to sell a product at the same price

nationalisation

moving the ownership and control of an industry to the private sector to the government

Privatisation

selling of public assets to private sector

commercial banks

banks that aim to make a profit by providing a range of banking services to households and firms

central bank

a government owned bank which provides banking services to the government and commercial banks and operates monetary policy

national minimum wage

a minimum rate of wage for an hour’s work fixed by the government for the whole economy

specialisation

the concentration on particular products or tasks

division of labour

workers specialising in particular tasks

trade unions

organizations of workers that aim at promoting and protecting the interest of their members (workers)

collective bargaining

representatives of workers negotiating with employers associations

profit satisficing

sacrificing profit to achieve goals

how do u measure unemployment

claimant count and labour force survey

frictional unemployment

temporary unemployment due to being in between jobs

cyclical unemployment

unemployment caused by lack of aggregate demand

structural unemployment

unemployment caused by long term changed in the pattern of demand and methods of profuction

seasonal unemployment

unemployment caused by a fall in demand at particular times of the year

free trade

the exchange of goods and services between countries without restriction

balance of payments

the record of a countrys economic transaction with other countries

globalisation

the process by which countries are becoming more interconnected through trade and other links

quota

a limit placed on imports and exports

embargo

a ban placed on a countries imports and exports

tariff

tax on imports