1.1 Full key terms

Limited resources

Having an end to the amount of resources available

Unlimited wants

People wanting more even though they have got what they wanted beforer

Needs vs wants

Basic requirements for humans to survive against the desires that people have to increase their happiness

Basic economic problem

Allocation of a nation's scarce resources between competing firms with infinite wants

Scarce resources

Amount of resources available when supply is limited

Opportunity cost

Cost of the next best alternative that was given up when making a choice

Capital goods

Purchased by firms to make consumer goods

Consumer goods

Goods purchased by households

Production Possibility Curve (PPC)

Shows the different combinations of goods that can be produced in an economy if all resources are efficiently used

Economic growth

Increase in the level of output of goods by an economy

Revenue

Money that a business receives over time from selling goods or services

Enterprises

Companies, organisations or businesses

Demand schedule

Table of the quantity demanded of a good at different prices

Demand curve

Line to show how much of a good will be bought at different prices

Effective demand

Amount of a good people are willing to buy at a given price and period of timme

Inverse relationship

When one variable increases, the other decreases

Shift in the demand curve

Movement to the left of right of the entire curve due to factors excluding price

Disposable income

Income available for people to spend

Inferior goods

Goods for which demand falls if income rises

Normal goods

Goods for which demand rises as income rises

Substitute goods

Goods bought alternatively to another some function good

Complementary goods

Goods purchased and consumed together

Supply

Amount that producers are willing to offer for sale at different prices in a given time period

Supply curve

Line to show how much of a good sellers will supply at different prices

Proportionate relationship

When one variable increases, so does the other

Shift in the supply curve

Movement to the left of right of the entire curve due to factors excluding price

Indirect taxes

Taxes levied on spending (eg. VAT)

Productivity

Rate at which goods are produced in relation to work, time and money to produce

Subsidy

Money paid by the government to reduce the cost of production or price

Yield

Amount of something that is produced

Equilibrium price

Price at which supply and demand are equal

Total revenue

Amount of money generated from selling a good (revenue \= price x quantity)

Excess demand

Where demand is greater than supply

Excess supply

Where supply is greater than demand

Price elasticity of demand

Responsiveness of quantity demanded to a change in price

Price inelastic demand

Change in price results in a proportionally smaller change in the quantity demanded (PED \= -1 —\> 0)

Price elastic demand

Change in price results in a proportionally greater change in the quantity demanded (PED \= -∞ —\> -1)

Perfectly elastic demand

Change in price will result in zero demand (PED \= -∞)

Perfectly inelastic demand

Change in price has no effect on demand (PED \= 0)

Unitary elastic demand

Responsiveness is proportionally equal to a change in price (PED \= -1)

Price elasticity of supply

Responsiveness of quantity supplied to a change in price

Price inelastic supply

Change in price results in a proportionally smaller change in supply (PES \= 0 —\> 1)

Price elastic supply

Change in price results in a proportionally greater change in supply (PES \= 1 —\> ∞)

Perfectly elastic supply

Where producers will supply an infinite amount at a given price (PES \= ∞)

Perfectly inelastic supply

Where supply is fixed (PES \= 0)

Unitary elastic supply

Change in price will be exactly proportional to quantity supplied (PES \= 1)

Income elasticity of demand

Responsiveness of quantity demanded to a change in income

Discretionary expenditure

Non-essential spending / spending that isn't automatic

Excise duty

Government tax on certain goods sold in the economy (eg. cigarettes, alcohol & petrol)

Value added tax (VAT)

Tax on some goods and services - businesses pay VAT on most goods and pass it on to the consumer

Economy

System that attempts to solve the basic economic problem

Private sector

Provision of goods and services by businesses owned by individuals or groups

Public sector

Government organisations that provide goods and services in the economy

Shareholders

People that own shares in a company

Dividend

Part of a company's profit that is divided among shareholders

Mixed economy

Economy where goods and services are provided by both public and private sectors

Market failure

Where markets lead to inefficiency

Merit goods

Goods that are under provided by the private sector

Public goods

Goods that aren't likely to be provided by the private sector

Non-excludability

Once provided for one consumer, it's provided for all

Non-rivalry

One person's consumption doesn't reduce the enjoyment of others

Free-riders

Individuals who enjoy the benefit of a good but allow others to pay for it

Monopolies

Situation where a business activity is controlled by only one company

Privatisation

Act of selling a company or activity controlled by the government to private investors

Nationalised industries

Public corporations previously part of the private sector

Natural monopolies

Situation that occurs when one firm in an industry can serve the entire market at a lower cost than would be possible with smaller firms

Takeovers

Acct of taking control of a firm by buying over 50% of its shares

Private costs

Costs of an activity to firms

External costs

Negative spillover effects of consumption or production on third parties

Social costs

Costs of an economic activity to both society and firms (social cost \= private cost + external cost)

Private benefits

Rewards of consumption or production

External benefits

Positive spillover effects of consumption or production on third parties

Social benefits

Benefits of an economic activity to both society and firms (social benefit \= private benefit + external benefit)

Third parties

Someone who isn't one of the two main parties involved in an agreement or legal case

Pollution permits

Government issued document that gives a business the right to discharge a certain quantity of a polluting material in the environment