Year 11 Preliminary Economics Vocabulary Flashcards

A comprehensive vocabulary flashcard set covering key terms, definitions, and formulas across all six topics of Year 11 Preliminary Economics.

Economics

The study of how individuals, businesses, governments, and societies make choices about allocating scarce resources to satisfy unlimited wants.

Scarcity

The economic problem that arises because resources are limited while human wants are unlimited.

Choice

A decision between alternative uses of scarce resources.

Opportunity cost

The value of the next best alternative that is given up when a choice is made, calculated as $\text{Opportunity Cost} = \frac{\text{Units Given Up}}{\text{Units Gained}}$.

Needs

Goods and services considered necessary for basic living and wellbeing.

Wants

Goods and services people desire but which are not essential for survival.

Resources

Inputs used to produce goods and services.

Factors of production

The resources used in production, commonly classified as land, labour, capital, and enterprise.

Land

Natural resources used in production, including land, minerals, forests, and water.

Labour

Human effort, both physical and mental, used in the production of goods and services.

Capital

Produced resources used to create other goods and services, such as machinery, equipment, and buildings.

Enterprise

The ability to organise factors of production, make business decisions, innovate, and bear risk.

Production possibility frontier (PPF)

A model showing the maximum combinations of two goods or services that can be produced using available resources and technology efficiently.

Productive efficiency

A situation where an economy produces the maximum possible output from its available resources.

Allocative efficiency

A situation where resources are allocated towards producing the combination of goods and services most valued by society.

Economic efficiency

The use of scarce resources in a way that maximises output and wellbeing while minimising waste.

Economic growth

An increase in an economy's capacity to produce goods and services over time.

Specialisation

Concentrating production on particular goods, services, or tasks in which a person, business, or economy has an advantage.

Division of labour

Breaking production into specialised tasks performed by different workers.

Exchange

The trading of goods, services, or resources between individuals, businesses, or economies.

Money

Anything generally accepted as payment for goods and services and repayment of debts.

Consumer goods

Goods purchased primarily to satisfy the immediate wants of consumers.

Capital goods

Goods used to produce other goods and services.

Economic system

The way a society organises the production, distribution, and consumption of goods and services.

Market economy

An economic system in which most resource-allocation decisions are made through interactions between buyers and sellers in markets.

Planned economy

An economic system in which government largely determines what is produced, how it is produced, and how output is distributed.

Mixed economy

An economic system combining market-based decision-making with government ownership, regulation, taxation, spending, and intervention.

Traditional economy

An economic system in which production and distribution are strongly influenced by customs, traditions, and established practices.

Circular flow of income

A model showing flows of income, spending, and production between sectors of the economy, where equilibrium is $S + T + M = I + G + X$.

Household sector

Individuals and families who supply factors of production, receive income, consume goods and services, and save.

Business sector

Firms that employ resources to produce goods and services.

Financial sector

Institutions and markets that facilitate saving, borrowing, lending, and investment.

Government sector

Government bodies that tax, spend, regulate, provide services, and influence economic activity.

Overseas sector

Economic interactions between Australia and the rest of the world, including trade and financial flows.

Leakage

Income withdrawn from the circular flow through saving, taxation, or spending on imports.

Injection

Spending added to the circular flow through investment, government spending, or exports.

Consumer

An individual or household that purchases goods and services to satisfy wants.

Consumer sovereignty

The idea that consumer spending decisions influence what businesses produce and how resources are allocated.

Utility

The satisfaction or benefit a consumer receives from consuming a good or service.

Total utility

The total satisfaction obtained from consuming a particular quantity of a good or service.

Marginal utility

The additional satisfaction obtained from consuming one additional unit of a good or service.

Diminishing marginal utility

The tendency for the additional satisfaction from each extra unit consumed to decrease as consumption increases.

Income

Money or other economic benefits received by individuals or households, including wages, interest, rent, and profit.

Disposable income

Income available to households after direct taxes have been deducted and government transfers have been included.

Saving

The portion of disposable income that is not spent on current consumption.

Consumption

Household spending on goods and services.

Average propensity to consume (APC)

The proportion of disposable income spent on consumption, calculated as $\text{APC} = \frac{C}{Y}$.

Average propensity to save (APS)

The proportion of disposable income saved, calculated as $\text{APS} = \frac{S}{Y}$, where $\text{APC} + \text{APS} = 1$.

Marginal propensity to consume (MPC)

The proportion of an additional dollar of income that is spent on consumption, calculated as $\text{MPC} = \frac{\Delta C}{\Delta Y}$.

Marginal propensity to save (MPS)

The proportion of an additional dollar of income that is saved, calculated as $\text{MPS} = \frac{\Delta S}{\Delta Y}$, where $\text{MPC} + \text{MPS} = 1$.

Business firm

An organisation that combines resources to produce and sell goods or services.

Revenue

Income received by a business from selling goods or services, calculated as $\text{Revenue} = P \times Q$.

Costs

Expenses incurred by a business in producing goods or services.

Profit

The amount by which total revenue exceeds total costs, calculated as $\text{Profit} = \text{Total Revenue} - \text{Total Costs}$.

Fixed costs

Costs that do not change with the level of output in the short run.

Variable costs

Costs that change as the level of production changes.

Total costs

The sum of fixed and variable costs.

Average cost

Total cost divided by the quantity of output produced, calculated as $\text{Average Cost} = \frac{\text{Total Cost}}{\text{Quantity Produced}}$.

Economies of scale

Reductions in average costs that can occur as a business increases its scale of production.

Diseconomies of scale

Increases in average costs that may occur when a business becomes too large or difficult to manage efficiently.

Productivity

The amount of output produced per unit of input.

Investment

Expenditure on capital goods that increase productive capacity.

Market

Any arrangement that enables buyers and sellers to exchange goods, services, or resources.

Demand

The quantity of a good or service consumers are willing and able to purchase at different prices over a given period.

Law of demand

Other things being equal, as the price of a good rises, quantity demanded falls, and as price falls, quantity demanded rises.

Quantity demanded

The amount of a good or service consumers are willing and able to purchase at a particular price.

Demand curve

A graph showing the relationship between price and quantity demanded.

Supply

The quantity of a good or service producers are willing and able to offer for sale at different prices over a given period.

Law of supply

Other things being equal, as price rises, quantity supplied generally rises, and as price falls, quantity supplied generally falls.

Quantity supplied

The amount producers are willing and able to sell at a particular price.

Supply curve

A graph showing the relationship between price and quantity supplied.

Market equilibrium

The point where quantity demanded equals quantity supplied.

Equilibrium price

The price at which quantity demanded equals quantity supplied.

Equilibrium quantity

The quantity bought and sold at the equilibrium price.

Shortage

A situation where quantity demanded exceeds quantity supplied at the current price.

Surplus

A situation where quantity supplied exceeds quantity demanded at the current price.

Change in quantity demanded

Movement along a demand curve caused by a change in the good's own price.

Change in demand

A shift of the entire demand curve caused by a non-price determinant of demand.

Change in quantity supplied

Movement along a supply curve caused by a change in the good's own price.

Change in supply

A shift of the entire supply curve caused by a non-price determinant of supply.

Substitute

A good that can be used instead of another good.

Complement

A good that is commonly consumed together with another good.

Normal good

A good for which demand tends to increase as consumer income increases.

Inferior good

A good for which demand tends to decrease as consumer income increases.

Price mechanism

The process through which changes in demand, supply, and prices help allocate scarce resources.

Relative price

The price of one good or service compared with the price of another.

Price signal

Information communicated through changing prices that influences decisions by consumers and producers.

Incentive

Something that encourages an individual or business to behave in a particular way.

Price elasticity of demand (PED)

The responsiveness of quantity demanded to a change in price, calculated as $\text{PED} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$.

Elastic demand

Demand where the percentage change in quantity demanded is greater than the percentage change in price.

Inelastic demand

Demand where the percentage change in quantity demanded is smaller than the percentage change in price.

Unit elastic demand

Demand where the percentage change in quantity demanded equals the percentage change in price.

Price elasticity of supply (PES)

The responsiveness of quantity supplied to a change in price, calculated as $\text{PES} = \frac{\% \text{ change in quantity supplied}}{\% \text{ change in price}}$.

Elastic supply

Supply where quantity supplied responds proportionately more than price changes.

Inelastic supply

Supply where quantity supplied responds proportionately less than price changes.

Competition

Rivalry between businesses seeking to attract customers and increase sales or market share.

Perfect competition

A theoretical market structure with many buyers and sellers, identical products, perfect information, and low barriers to entry and exit.

Monopolistic competition

A market with many firms selling differentiated products and relatively low barriers to entry.

Oligopoly

A market dominated by a small number of large firms whose decisions are interdependent.

Monopoly

A market in which one firm is the sole or overwhelmingly dominant supplier.