Economics IGCSE Term 2

Market

an arrangement which brings buyers into contact with sellers and which includes all the buyers and sellers

Consumers

people who buys goods and services for their own or their familys use

Firms

a business organisation that produces goods and services

Raw materials

basic materials used to produce goods

Demand

the willingness and ability to buy a product

Inversely related

demand will rise as price falls and fall as price rises

Market demand

total demand for a product

Individual demand

the amount of a product an individual would be willing and able to buy, at different prices

Aggregation

the addition of individual units to arrive at a total amount

Demand schedule

lists the different quantities demanded of a product, at different prices over a particular time period

Extension in demand 

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

Contraction in demand

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

Change in demand

more or less of a product being demanded at any given price; causes a shift of the demand curve, either to the right or the left

Increase in demand

a rise in demand at any given price; causes the demand curve to shift to the right

Decrease in demand

a fall in demand at any given price, causing the demand curve to shift to the left

Normal goods 

a product whose demand increases when income increases and decreases when income falls 

Inferior goods 

a product whose demand decreases when income increases and increases when income falls

substitute

a product that can be used in place of another

Complement

a product that is used tgt with another product

Ageing population

an increase in the average age of the population

Birth rate

the number of lives births per 100 of a countrys population in a year

Supply

the willingness and ability to sell a product 

Individual supply

the supply of one firm

Market supply

total supply of a product 

Extension in supply

a rise in the quantity supplied caused by a rise in the price of the product itself 

Contraction in supply 

a fall in the quantoty supplied caused by a fall in the price of the product 

Change in supply

changes in supply conditions causing shifts in the supply curve

Increases 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

Unit costs

the average cost of production. It is found by dividing total cost by output

Improvement in technology

advances in the quality of capital goods and methods of production

Direct taxes

taxes on income and wealth of individuals and firms

Indirect taxes

taxes on goods and services 

tax 

a payment to the government 

subsidy 

a payment by the government to encourage the production or consumption of a product 

Demand

the willingness and ability to buy a product

Supply

the willingness and ability to sell a product

Price mechanism 

the way the decisions made by households (buyers or consumers) and firms (sellers) interact to decide the allocation of resources 

Market is in equilibrium

a situation where demand and supply are equal

Market price

the price at which a product is bought and sold

Equilibrium price

the price at which demand and supply are equal and there is no surplus and no shortage

Equilibrium quantity

when the quantity demanded by the buyers equals the quantity supplied by sellers, and so there is no surplus and no shortage

Market is in disequilibrium

a situation where demand and supply are not equal

Surplus

the amount by which supply is greater than demand (excess supply)