All definitions compiled whilst doing exam papers

Define equilibrium price:

- Market clearing price

- No excess demand or excess supply

- The balanced point with no tendency to change

• The price at which supply equals demand

Things that affect PES cause it to be inelastic: for gas

- Supply of gas is price inelastic

- Lack of storage/ stockpile

- Lack of spare capacity

- Inflexible resources

- Time period

- Alternative substitute source of gas available

What is specialisation?

- Concentrates on one good/ service

- Produces a narrow range of goods or services

- Over time develops a cost advantage in producing these goods and services

Specialization refers to individuals, firms, or countries focusing on a limited range of goods or services, often leading to increased efficiency and productivity.

Advantages of specialising in the production of goods to trade:

- Specialisation increases the size of the market

- Gives opportunity to reduce unit costs

- Increased or decreased quality due to specialisation

- Allows for increased productivity within a particular product/ market and ultimately increased profits

What is a positive statement?

A positive statement is a factual statement about the world that can be tested and verified

Normative statement

Normative statements which express opinions or values.

Why is it rational for a firm to raise prices when there is an excess demand:

- Firms will aim to maximise profits

- Helps to ration demand for finite resources since there is more demand than supply (excess demand)

- Businesses increase prices

Consumers bid-up prices

What is a mixed economy?

- A mixed economy means that part of the economy is left to the free market and part of it is managed by the government.

- Public and private sectors existing within the economy