Econ

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Question

Answer

1

What is scarcity?

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

2

What are the factors of production?

Land, labour, capital and enterprise.

3

What is opportunity cost?

The value of the next best alternative forgone when making a choice.

4

What is a free good?

A good that is not scarce and has no opportunity cost.

5

What is a consumer?

An individual or organisation that purchases goods and services.

6

What is a producer?

An individual or organisation that creates goods or services.

7

What is utility?

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

8

What is specialisation?

Concentrating production on a particular task, product or industry.

9

What is division of labour?

Splitting production into separate tasks performed by different workers.

10

What is productivity?

The amount of output produced per unit of input.

11

What is efficiency?

Producing the maximum possible output from available resources.

12

What is productive efficiency?

Producing at the lowest possible average cost.

13

What is allocative efficiency?

When resources are allocated according to consumer preferences, generally where price equals marginal cost.

14

What is a market?

A system through which buyers and sellers interact to exchange goods and services.

15

What is demand?

The quantity of a good or service consumers are willing and able to buy at a given price.

16

What is supply?

The quantity of a good or service producers are willing and able to sell at a given price.

17

What is equilibrium price?

The price at which quantity demanded equals quantity supplied.

18

What is excess demand?

When quantity demanded exceeds quantity supplied at a particular price.

19

What is excess supply?

When quantity supplied exceeds quantity demanded at a particular price.

20

What is a substitute?

A good that can be consumed instead of another good.

21

What is a complement?

A good consumed together with another good.

22

What is a normal good?

A good for which demand increases as consumer income increases.

23

What is an inferior good?

A good for which demand decreases as consumer income increases.

24

What is price elasticity of demand (PED)?

The responsiveness of quantity demanded to a change in price.

25

What is price elasticity of supply (PES)?

The responsiveness of quantity supplied to a change in price.

26

What is income elasticity of demand (YED)?

The responsiveness of demand to a change in consumer income.

27

What is cross elasticity of demand (XED)?

The responsiveness of demand for one good to a change in the price of another good.

28

What is a public good?

A good that is non-rivalrous and non-excludable.

29

What is a private good?

A good that is both rivalrous and excludable.

30

What is a merit good?

A good that is under-consumed because consumers may underestimate its benefits.

31

What is a demerit good?

A good that is over-consumed because consumers may underestimate its costs.

32

What is a positive externality?

A benefit to a third party arising from consumption or production.

33

What is a negative externality?

A cost imposed on a third party arising from consumption or production.

34

What is market failure?

When the free market fails to allocate resources efficiently.

35

What is asymmetric information?

When one party in a transaction has more or better information than another.

36

What is a government intervention?

An action taken by the government to influence economic activity.

37

What is a subsidy?

A payment from the government to reduce producers’ costs or encourage production/consumption.

38

What is an indirect tax?

A tax imposed on spending or consumption rather than directly on income or wealth.

39

What is a price ceiling?

A legal maximum price that can be charged for a good or service.

40

What is a price floor?

A legal minimum price that can be charged for a good or service.