Economics- Paper 1 Definitions

Economic growth

increase in the level of output by a nation

Demand

how much consumers are willing and able to buy at various given prices over a period of time.

Quantity demanded

how much consumers are willing and able to buy at a given price

Disposable income

income that is available to someone over a period of time to spend.

Inferior goods

goods for which demand will fall if income rises

Normal goods

goods for which demand will increase if income rises

Supply

how much producers are willing and able to sell at various given prices over a period of time

Quantity supplied

how much producers are willing and able to sell at a given price

Indirect taxes

taxes levied on spending

Excess demand

shortage of goods in the market

Excess supply

goods remain unsold

Price elasticity of Demand

responsiveness of demand to a change in a goods own price.

Price elasticity of Supply

responsiveness of supply to a change in a good’s own price

Income elasticity of Demand

responsiveness of demand to a change in income

Luxury goods

goods that consumers like to buy if they can afford them

Economy

system that attempts to solve the basic economic problem

Mixed Economy

economy that relies on both the public sector and the private sector to provide goods and services

Market Failure

when markets lead to inefficiency

Privatization

act of selling a government owned organization or activity to private investors

Externalities

spillover effects on people outside the market system

Productivity

rate at which goods and services are produced in relation to work, time, and money needed to produce them

Division of labor

breaking down the production process into smaller parts, with each worker allocated to a specific task.

Specialization

production of a limited range of goods.

Fixed costs

costs that do not vary with the level of output

Variable costs

costs that change when output changes.

Economies of scale

falling average costs due to expansion

Take over

when one firm buys out another firm

Monopoly

when one firm dominates a market

Barriers to entry

legal barriers, patents, marketing budgets, technologies, and high start-up costs

Wage rate

amount of money paid to workers for their services over a period

Anti-competitive practices

attempts by firms to prevent or restrict competition