IB Economics HL: 1.1 & 1.2 - Fundamental Vocabulary

Vocabulary contained in lessons 1.1 and 1.2

Scarcity

Insufficiency of resources to satisfy unlimited human wants

Choice

Opportunity Cost

Efficiency

Best possible use of scarce resources to maximize output and utility, while limiting waste.

Equity

Everyone receiving what they need.

Economic Well-Being

To be able to pursue one’s goals, secure housing, a job, and a source of income, and sustain the above over a period of time.

Opportunity Cost

The next best alternative forgone

Sustainability

Use of resources that accounts for future needs.

Interdependence

Every aspect of the economy depends on on another; nothing is self sufficient.

Government Intervention

Governments regulate the consumer- producer interaction.

Goods

Anything that can be demanded.

Capital

Man-made input.

Fundamental Problem

Limited factors of production need to be used to stimulate economic growth and satisfy unlimited wants.

3 Basic Questions

For whom to produce?, What to produce?. and How to produce?

Resource Allocation

Distribution of resources (FoP) among multiple alternatives.

Underallocation

Not enough resources are being allocated towards a particular task.

Overallocation

Too many resources are being allocated to a particular task.

Misallocation

Resources are allocated inefficiently, leading to a failure in achieving optimal outcomes.

Reallocation

Decision to change previous allocation.

Distribution of Income

Refers to how total income is shared among individuals or groups in an economy, impacting wealth inequality and socio-economic dynamics.

Market-method of Allocation

The process by which resource allocation is determined through supply and demand in a competitive market. Characterized by free markers, private ownership, price rationing.

Command-method of Allocation

the method of allocating resources through centralized control, typically by the government, rather than through market forces.