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Economics
Economics
27
Economics
Not Applicable
04/16/2012

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Term
Basic Economic Problem
Definition
Resources are finite, wants are infinite
Term
Economic System
Definition
The way in which an economy decides to allocate its resources and the ownership of those resources
Term
Factors of Production
Definition
Land, labour, capital and enterprise
Term
Non-Renewable Resource/Economic Goods
Definition
One whose stock level is decreased over time as it is consumed eg fossil fuelds, steel, copper
Term
Normative Statement
Definition
Statement that contains an opinion, usually contains words such as "should", "ought to" etc.
Term
Opportunity Cost
Definition
Value of the next best alternative forgone as a result of a choice made
Term
Positive Statement
Definition
Statement that can be proved or disproved
Term
Production Possibility Frontier
Definition
Shows all possible combinations of two goods which can be produced in an economy using all of its resources to maximum efficiency
Term
Renewable Resource/Free Goods
Definition
One whose stock level can be maintained over a period of time eg solar energy, wind power, water, oxygen
Term
Scarcity
Definition
Lack of a certain resource due to the inability to obtain it
Term
Capital Goods
Definition
Machinery, equipment, factories etc. Produces consumer goods
Term
Consumer Goods
Definition
Final point of sale
Term
Free Market
Definition
Decisions on what, how and for whom to produce are left to the operation of the price mechanism.
Resources are privately owned.
Minimum government intervention.
High levels of competition
Term
Mixed Economy
Definition
Decisions on what, how and for whom to produce are made partly by the private sector and the government.
Term
Substitution Effect
Definition
If price for a good rises then people substitute this item with a cheaper product eg. a rise in the price of coffee may cause an increase in the demand for tea
Term
Real Income Effect
Definition
Incomes remain the same but prices rise so people spend less therefore demand falls
Term
Extension of Demand/Supply
Definition
Movement along the curve to the right
Term
Contraction of Demand/Supply
Definition
Movement along the curve to the left
Term
Non-Price Factors Affecting Demand
Definition
Advertising
Fashion/Trends
Income
Seasonal demand
Term
Non-Price Factors Affecting Supply
Definition
Availability of resources
Technology
Competition
Government policies
Environmental issues
Term
Effect on Equilibrium - Increased Demand
Definition
Demand curve shifts to the right
Term
Effect on Equilibrium - Increased Supply
Definition
Supply curve shifts to the right
Term
Effect on Equilibrium - Decreased Demand
Definition
Demand curve shifts to the left
Term
Effect on Equilibrium - Decreased Supply
Definition
Supply curve shifts to the left
Term
Inelastic Demand
Definition

Steep, negative gradient: percentage change in price leads to smaller percentage change in quantity demanded; elasticity is less than 1

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Term
Elastic Demand
Definition
Shallow, negative gradient: percentage change in price leads to a larger percentage change in quantity demanded; elasticity is greater than 1
Term
Price Elasticity of Demand
Definition
The responsiveness in the demand for a good due to a change in its price
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