Economics ALL

Econ IB SL

Economics

A social science that studies the relationship between humans and the economy using past experiences and observations.

Scarcity

Limited availability of resources in relation to our unlimited wants, leading to the need for choices.

Opportunity Cost

What you forego to gain something else; the cost of the next best alternative.

Efficiency

The optimal use of resources to minimize waste, achieved when input is less than output.

Equity

Fair distribution of resources, which is subjective or normative rather than equal.

Economic Well-Being

A multidimensional concept relating to the prosperity level and quality of living standards.

Sustainability

Using resources in a way that the needs of future generations are not compromised.

Interdependence

Economic actors interact, making them dependent on each other rather than self-sufficient.

Intervention

Government actions to control choices when market powers fail to meet social goals.

Production Possibilities Curve (PPC)

A graphical model showing the maximum output options for two goods under conditions of scarcity.

Circular Flow Model

A graphical representation of the flow of money, goods, and services in an economy.

Microeconomics

The branch of economics dealing with individual economic agents like consumers and firms.

Law of Demand

States that as prices increase, quantity demanded decreases, and vice versa.

Law of Supply

States that as prices increase, quantity supplied increases, and vice versa.

Equilibrium Price

The point where the quantity demanded equals the quantity supplied.

Elasticity

A measure of how responsive the quantity demanded or supplied of a good is to price changes.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to sell a good for and the price they actually receive.

Perfect Competition

A market structure where many firms sell identical products, and no single firm can influence the price.

Monopoly

A market structure where one firm is the sole seller of a product, controlling market prices.

Oligopoly

A market structure with a few large firms that dominate the market.

Monopolistic Competition

A market structure with many firms offering slightly differentiated products.

Total Cost (TC)

The sum of fixed and variable costs incurred by a firm in production.

Marginal Cost (MC)

The cost of producing one additional unit of a good or service.

Price Floors

The minimum price set by the government above equilibrium, creating a surplus.

Price Ceilings

The maximum price set by the government below equilibrium, creating a shortage.

Externalities

Unintended side effects of economic activities that affect third parties.

Aggregate Demand (AD)

The total quantity of goods and services demanded across all levels of the economy.

Aggregate Supply (AS)

The total quantity of goods and services that producers are willing to supply at different price levels.

Current Account

Records all transactions related to goods, services, income, and current transfers.

Balance of Payments (BOP)

A systematic account of all economic transactions between residents and the rest of the world.

Trade Protection

Government policies restricting or limiting international trade to protect domestic industries.

Tariffs

Taxes imposed on imported goods, raising their prices and limiting competition.

Quotas

Quantitative restrictions on the volume of imports allowed into a country.

Subsidies

Government payments to domestic producers to lower production costs and encourage production.

Trade Diversion

Shifts in trade from lower-cost external suppliers to higher-cost suppliers within a trading bloc.

Economic Integration

The process of countries coordinating policies to reduce trade barriers and increase interdependence.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Absolute Advantage

The ability of a country to produce a good using fewer resources than another country.

Sustainable Development

Development that meets present needs without compromising future generations' ability to meet their own.

Human Development Index (HDI)

A composite index measuring average achievement in health, education, and standard of living.

Gini Coefficient

A measure of income inequality within a population.

Poverty Traps

Self-reinforcing mechanisms that keep individuals or communities in poverty.

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country.

Market-Based Policies

Policies that emphasize minimal government intervention, allowing market forces to allocate resources.

Interventionist Policies

Policies involving active government intervention to promote economic development.

Supply-Side Policies

Policies aimed at increasing the productive capacity of the economy.

Economic Growth

An increase in a country's output of goods and services, reflected in GDP.

Economic Development

Improvement in living standards, reduction of poverty, and enhancement of well-being.

Economics

The social science that studies the relationship between humans and the economy using past experiences and observations.

Limited Resources

The finite amount of resources available to humans to satisfy their unlimited needs and wants.

Scarcity

The fundamental concept of limited availability of resources in relation to our unlimited wants.

Opportunity Cost

The concept of what is foregone in order to gain something else.

Efficiency

The optimal use of resources to minimize resource waste.

Equity

The fair distribution of resources, rather than equal distribution.

Economic Well-Being

The multidimensional concept relating to the prosperity level and quality of living standards of people.

Sustainability

Using resources in a way that does not compromise the needs of future generations.

Change

The constant changes in the economic world that economists need to be aware of in their models.

Interdependence

The concept that economic actors interact with each other and are interdependent.

Intervention

When market powers fail to meet social goals, governments intervene to control choices.

Central Economic Problem (Scarcity)

The friction between unlimited needs and limited resources.

Wants

Desires for goods and services expressed as consumer demand in markets.

Needs

Goods and services required to meet basic needs.

Resources

Factors of production used to create goods and services.

Land

Resources needed to produce goods and services.

Labor

Skilled or unskilled human efforts used in production.

Capital

Machinery, tools, or money used to make a profit.

Entrepreneurship

The combination of all factors of production to organize planning and allocation.

Basic Economic Questions

What, how much, how, and for whom to produce.

Allocation of Resources

The process of dividing factors of production to produce goods and services in an economy.

Opportunity Cost

The cost of what is foregone in order to obtain something.

Economic Goods

Goods that have economic value and require resources to consume or produce.

Free Goods

Goods that have no economic value and do not require resources to consume or produce.

Production Possibilities Curve (PPC)

A graphical model of the two products that an economy can produce given its resources and technology.

Circular Flow Model

A graphical model that explains the flow of money in a closed economy.

Injections

The inflow of money into the economy, such as government spending, financial sector incentivization, and exports.

Leakages

The outflow of money from the economy, such as taxes, savings, and imports.

Microeconomics

The branch of economics dealing with individual economic agents and their decisions.

Scarcity

The fundamental economic problem where resources are limited but human wants are limitless.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Efficiency

Achieving the most output with the least amount of input, maximizing total benefit to society.

Utility

The satisfaction or pleasure derived from consuming goods and services.

Law of Demand

States that as the price of a good increases, the quantity demanded decreases.

Law of Supply

States that as the price of a good increases, the quantity supplied increases.

Equilibrium Price

The price where the quantity demanded equals the quantity supplied.

Elasticity

Measures how responsive the quantity demanded or supplied is to a change in price.

Price Elasticity of Demand (PED)

The responsiveness of quantity demanded of a good to a change in its price.

Elastic Demand

When a price increase leads to a significant decrease in quantity demanded (PED > 1).

Inelastic Demand

When price changes have little effect on quantity demanded (PED < 1).

Unitary Elasticity

When a price change results in an equal proportional change in quantity demanded (PED = 1).

Price Elasticity of Supply (PES)

The responsiveness of quantity supplied to changes in price.

Normal Goods

Goods for which demand increases as income increases (YED > 0).

Inferior Goods

Goods for which demand decreases as income increases (YED < 0).

Cross-Price Elasticity of Demand (XED)

The responsiveness of the demand for one good when the price of a related good changes.

Substitutes

If the price of one good rises, demand for another good increases (XED > 0).

Complements

If the price of one good rises, demand for another good decreases (XED < 0).

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay.

Producer Surplus

The difference between the price at which producers are willing to sell a good and the price they actually receive.

Perfect Competition

A market structure where there are many buyers and sellers with identical products.

Monopoly

A market structure where there is only one seller controlling the supply of a product.