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Economics

398 Terms

1

wants

desires for goods and services

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2

resources

factors used to produce goods and services

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3

the economic problem

unlimited wants exceeding finite resources

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4

scarcity

a situation where there is not enough to satisfy everyone’s wants

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5

economic good

a product which requires resources to produce it and therefore has an opportunity cost

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6

free good

a product which does not require any resources to make it and so does not have an opportunity cost

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7

factors of production

the economic resources of land, labour, capital and enterprise

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8

land

gifts of nature available for production

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9

labour

human effort used in producing goods and services

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10

capital

human made goods used in production

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11

consumer goods

goods and services purchased by households for their own satisfaction

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12

enterprise

risk bearing and key decision making in business

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13

occupationally mobile

capable of changing use

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14

geographically immobile

incapable of moving from one location to another

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15

mobility of labour

the ability of labour to change where it works or in which occupation

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16

mobility of capital

the ability to change where capital is used or in which occupation

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17

mobility of enterprise

the ability to change where enterprise is used or in which occupation

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18

entrepreneur

a person who bears the risks and makes the key decisions in a business

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19

labour force

people in work and those actively seeking work

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20

productivity

the output per factor of production in an hour

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21

labour productivity

output per worker hour

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22

output

goods and services produced by the factors of production

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23

investment

spending on capital goods

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24

gross investment

total spending on capital goods

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25

depreciation

the value of capital goods that have worn out or become obsolete

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26

net investment

gross investment minus depreciation

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27

negative net investment

reduction in the number of capital goods caused by some obsolete and worn out capital goods not being replaced

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28

opportunity cost

the next best alternative foregone when making a decision

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29

production possibility curves

a curve that shows the maximum output of two types of products and combinations of those products that can be produced with existing resources and technology

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30

microeconomics

the study of the behaviour and decisions of households and firms, and the performance of individual markets

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31

macroeconomics

the study of the whole economy

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32

market

an arrangement which brings buyers into contact with sellers

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33

economic agents

those who undertake economic activities and make economic decisions

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34

private sector

firms owned by shareholders and individuals

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35

economic system

the institutions, organisations and mechanisms that influence economic behaviour and determine how resources are allocated

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36

planned economic system

an economic system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives

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37

directives

state instructions given to state-owned enterprises

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38

mixed economic system

an economy in which both the private and public sectors play an important role

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39

market economic system

an economic system where consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned

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40

price mechanism

the way the decisions made by households and firms interact to decide the allocation of resources

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41

capital - intensive

the use of a high proportion of capital relative to labour

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42

labour - intensive

the use of a high proportion of labour relative to capital

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43

demand

the willingness and ability to buy a product

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44

supply

the willingness and ability to sell a product

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45

market equilibrium

a situation where demand and supply are equal at the current price

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46

market disequilibrium

a situation where demand and supply are not equal at the current price

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47

market demand

total demand for a product

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48

aggregate

the addition of individual components to arrive at a total amount

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49

extension in demand

a rise in the quantity demanded caused by a fall in the price of the product itself

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50

contraction in demand

a fall in the quantity demanded caused by a rise in the price of the product itself

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51

changes in demand

shifts in the demand curve

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52

increase in demand

a rise in demand at any given price, causing the demand curve to shift to the right

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53

determinants of demand (CATPIS)

  • price of complement - advertising - trends / fashions / tastes - price - not a determinant - income - price of substitutes

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54

decrease in demand

a fall in demand at any given price, causing the demand curve to shift to the left

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55

normal goods

a product whose demand increases when income increases and decreases when income falls

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56

inferior goods

a product whose demand decreases when income increases and increases when income falls

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57

substitute

a product that can be used in place of another

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58

complement

a product that is used together with another product

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59

ageing population

an increase in the average age of the population

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60

birth rate

the number of live births per thousand of the population in a year

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61

market supply

total supply of a product

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62

extension in supply

a rise in the quantity supplied caused by a rise in the price of the product itself

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63

contraction in supply

a fall in the quantity supplied caused by a fall in the price of the product itself

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64

change in supply

changes in supply conditions causing shifts in the supply curve

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65

increase in supply

a rise in supply at any given price, causing the supply curve to shift to the right

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66

decrease in supply

a fall in supply at any given price, causing the supply curve to shift to the left

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67

unit cost

the average cost of production. It is found by dividing total cost by output

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68

improvements in technology

advances in the quality of capital goods and methods of production

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69

direct taxes

taxes on the income and wealth of individuals and firms

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70

indirect taxes

taxes on goods and services

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71

tax

a payment to the government

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72

subsidy

a payment by a government to encourage the production or consumption of a product

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73

equilibrium price

the price where demand and supply are equal

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74

excess supply

the amount by which supply is greater than demand (surplus)

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75

disequilibrium

a situation where demand and supply are not equal

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76

excess demand

the amount by which demand is greater than supply (shortage)

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77

price elasticity of demand

a measure of the responsiveness of the quantity demanded to a change in price

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78

elastic demand

when the quantity demanded changes by a greater percentage than the change in price

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79

inelastic demand

when the quantity demanded changes by a smaller percentage than the change in price

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80

perfectly elastic demand

when a change in price causes a complete change in the quantity demanded

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81

perfectly inelastic demand

when a change in price has no effect on the quantity demanded

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82

unit elasticity of demand

when a change in price causes and equal change in the quantity demanded, leaving total revenue unchanged

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83

price elasticity of supply

the measure of the responsiveness of the quantity supplied to a change in price

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84

elastic supply

when the quantity supplied changes by a greater percentage than the change in price

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85

inelastic supply

when the quantity supplied changes by a smaller percentage than the change in price

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86

perfectly inelastic supply

when a change in price has no effect on the quantity supplied

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87

perfectly elastic supply

when a change in price causes a complete change in quantity supplied

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88

unit PES

when a change in price causes an equal percentage change in the quantity supplied

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89

public sector

the part of the economy controlled by the government

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90

state-owned enterprises

organisations owned by the government which sell products

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91

privatisation

the sale of public sector assets to the private sector

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92

price mechanism

the system by which the market forces of demand and supply determine prices

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93

market failure

market forces resulting in an inefficient allocation of resources

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94

causes of market failure

  • free riders - consumers and private sector firms only take into account the costs and benefits to themselves - monopoly seller

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95

free rider

someone who consumes a good or service without paying for it

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96

allocative efficiency

when resources are allocated to produce the right products in the right quantities

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97

productive efficiency

when products are produced at the lowest possible cost and making full use of resources

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98

dynamic efficiency

efficiency occurring over time as a result of investment and innovation

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99

advantages of the market economic system

  • very responsive to changes in consumer demand, consumers determine what is produced - consumers can choose which products to buy and which firms to buy from - quality may be higher, competitive pressure on firms causes them to want higher profit from higher quality products

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100

third parties

those not directly involved in producing or consuming a product

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