What is an economic good?
Goods which have an opportunity cost and suffer from the problem of scarcity
Economic goods are limited in availability.
Define a free good.
Goods with no opportunity cost, since there is no scarcity of the good; they are not traded
Free goods are abundant and available without cost.
What is the basic economic problem?
The problem of scarcity; wants are unlimited but resources are finite so choices have to be made
This problem necessitates prioritization in resource allocation.
Define scarcity.
The shortage of resources in relation to the quantity of human wants
Scarcity drives economic decision-making.
What are needs?
Requirements necessary for an individual to live and function, such as food and shelter
Needs are essential for survival.
What are wants?
Something that people desire to have, but do not necessarily need to survive
Wants can vary greatly among individuals.
Define normative statements.
Subjective statements based on value judgements and opinions; cannot be proven or disproven
Normative statements reflect personal beliefs.
What are positive statements?
Objective statements which can be tested with factual evidence to be proven or disproven
Positive statements are based on observable phenomena.
What is labour in economics?
One of the four factors of production; human capital
Labour includes the workforce’s skills and efforts.
Define land as a factor of production.
One of the four factors of production; natural resources such as oil, coal, wheat, physical space
Land encompasses all natural resources used in production.
What is capital in the context of production?
One of the four factors of production; goods which can be used in the production process
Capital includes machinery, tools, and buildings.
Define enterprise.
One of the four factors of production; the willingness and ability to take risks and combine the other three factors of production
Enterprise is crucial for innovation and business development.
What are incentives?
Something which motivates an individual to make a decision and behave a certain way
Incentives can be financial or non-financial.
What does maximisation refer to in economics?
Consumers aim to generate the greatest utility possible, firms aim to generate the highest profits possible
Maximisation is a key goal for both consumers and producers.
Define resource allocation.
How resources are distributed among producers and how goods and services are distributed among consumers
Effective resource allocation is essential for economic efficiency.
What is a market economy?
An economy where the market mechanism allocates resources so consumers make decisions about what is produced
Market economies rely on supply and demand.
Define a planned economy.
All factors of production are allocated by the state, so they decide what, how and for whom to produce goods
Planned economies often aim for equitable distribution.
What is a mixed economy?
Both the free market mechanism and the government allocate resources
Mixed economies combine elements of market and planned economies.
Define economic efficiency.
When resources are allocated optimally, so every consumer benefits and waste is minimised
Economic efficiency is a goal for all economies.
What is productive efficiency?
When resources are used to give the maximum possible output at the lowest possible cost; MC=AC
Productive efficiency is crucial for competitiveness.
Define allocative efficiency.
When resources are allocated to the best interests of society, when there is maximum social welfare and maximum utility; P=MC
Allocative efficiency ensures that resources meet consumer needs.
What is opportunity cost?
The value of the next best alternative forgone
Opportunity cost is a fundamental concept in economics.
Define trade off.
When one thing is lost to gain something else
Trade offs are inherent in decision-making.
What is a production possibility curve/frontier?
Depicts the maximum productive potential of an economy, using a combination of two goods and resources, when resources are fully and efficiently employed
The curve illustrates trade-offs between different goods.
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1.1 The Economic Problem4
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1.2 The Allocation Of Resources7
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1.3 Opportunity Cost7
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2.1 Specialisation And Trade5
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2.2 Demand14
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2.3 Supply7
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2.4 consumer and producer surplus6
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2.5 the interaction of markets2
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2.6 Elasticity17
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2.7 The Concept Of The Margin6
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2.8 Market Failure14
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2.9 information failure12
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2.10 Public Goods7
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2.11 Government Intervention61
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3.1 Business Objectives11
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3.2 Costs And Economies Of Scale23
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3.3 Revenue And Profit0
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4.1 Perfect Competition6
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4.2 Monopoly + (Price discrimination)30
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4.3 monopolistic competition2
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4.4 Olligopolies15
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4.5 Contestable Market Theory10
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5.1 Demand Of Labour11
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5.2 Supply Of Labour14
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5.3 Monopsony + Trade Union + Bilaterally Monopolly12
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section 1 definitions25
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section 2 definitions73
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section 3 definitions35
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section 4 definitions18
