Aggregate demand: The total demand for a country’s goods or services at a given price level and at any given time
Aggregate supply: The total amount that producers in an economy are willing to supply at a given price level in a given time period
allocative efficiency: where consumer satisfaction is maximised
Asymmetric information: Information not equally shared between 2 parties
capital: man made aids to production
Change in demand: where a change in a non-price factor leads to an increase/decrease of demand
choice:the selection of appropriate alternatives
command economy: an economic system where capital and resources are allocated centrally
complements: goods for which there is joint demand
consumer confidence: how confident consumers are about the future economic prospects
cooperation tax: A tax on firms profits
Cross elasticity of demand (XED): the responsiveness in demand for one product compared to the change in price of another product.
Demand: The quantity of a product that consumers are willing to purchase and are able to purchase at various prices over a period of time
Demand curve: This shows the quantity demanded and the price of the product
Demerit goods: goods where the consumption of them is more harmful to the consumers than they actually realise
direct tax: A tax that cannot be avoided and taxes the people and firms
Disposable income: Income after taxes on income have been deducted and state benefits have been deducted
division of labour: The specialisation of labour, where labour is broken down into separate tasks
economic efficiency: when the economy is both productively and allocatively efficient
Labour: The quantity and quality of human resources
Enterprise: The willingness to take the risk
Factors of production: The resource inputs that are available in an economy for the production of goods and services
Land: natural resources in an economy
Want: anything you like, regardless of whether you have the resources to purchase it
scarcity: A situation where there are insufficient resources to meet all want
opportunity cost: The cost of the next best alternative forgone
Factor endowment: The stock of the factors of production
Production: the output of goods and services
Subsidy: A payment by a governing body to increase consumption or production of a particular good or service
production possibility curve: This shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology
trade off: the calculation involved, when deciding to give up one good for another.
Economic growth: Change in the productive potential of an economy
productive potential: is the change in the maximum output that an economy is capable of producing.
Market economy; An economic system whereby resources are allocated according to the market forces of demand and supply
Price system: A method of allocating resources by the free movement of prices
Supply: the quantity of a product that producers are willing and able to provide at different market prices over a period of time
Mixed economy: an economic system where resources are allocated through a mixture of the market and direct public sector involvement
Definitions for a competitive market and how they work
Market: Where buyers or sellers meet to exchange products
Sub-market: A recognised distinguishable part of a market, also known as a market segment
Notional demand: the desire for product
effective demand: the willingness and ability to buy a product
Consumer surplus: The amount that the consumer is willing to pay, above the price that is actually paid.
Real disposable income: Income after all forms of direct tax have been taken into account. And state benefits have been added to take account the change in price levels
Normal goods: Goods for when income increases, demand increases
Inferior goods: goods for when income increases, demand decreases
substitutes: competing goods
complements: goods for which there are joint demand
change in demand: Where a non-price factor leads to an increase/decrease in demand
producer surplus: the difference between the price the producer is willing to accept and what is actually paid.
equilibrium quantity: The amount that is wanted and supplied at a given price
Disequilbrium: Any postion in the market where demand and supply are not equal
surplus: an excess of supply over demand
Shortage: an excess of demand over supply
Elasticity: The extent to which buyers and sellers respond to change in market conditions
Price elasticity of demand: the responsiveness of the quantity demanded to a change in the price of the product
Price elastic: where the percentage change in quantity demanded, is sensitive to a change in price
price inelastic: where the percentage change in quantity demand is not that sensitive to a change in price
Income elasticity of demand; The responsiveness of demand to a change in income
Normal goods: Goods witha a positive income elasticity of demand
Income elasticity: goods for which a change in income produces a greater change in demand
income inelastic: goods for which a change in income produces a smaller change in demand.
Cross elasticity of demand (XED): The responsiveness of demand for one product in relation to the change in price of another product
Price elasticity of supply: The responsiveness of the quantity supplied to a change in price of the product
Market failure: Where the free market mechanism fails to achieve economic efficiency
Productive efficiency: where production takes place using the least amount of scarce resources
Economic efficiency: Where both allocative and productive efficiency are being achieved
Inefficiency: where economic efficiency is not achieved
free market mechanism: The system by which the free market forces of demand and supply determine prices and the decisions made by consumers and firms
information failure: A lack of information resulting in consumers and producers making decisions that do not maximise their welfare
Private costs: The costs incurred by those taking a particular action
private benefits: the benefits incurred by those taking the particular action
external costs: the costs that are the consequence of externalities to third parties
External benefits: the benefits that accrue as a consequence of externalities to third parties
Social costs: The total costs of a particular action
social benefits: the total benefits of a particular action
negative externalities: this exists when the social costs of an activity is greater than the private costs
positive externalities: Where the social benefit is greater than the private benefit
merit goods: goods that have greater benefits than consumers actually realise
De-merit: goods that are more harmful than consumers actually realise
public goods: goods that are collectively consumed and have characteristics of non rival and non excludability
Free rider: someone who directly benefits from the consumption of a public good but who does not contribute towards its provision
non-rivalry: situation where consumption by one person does not affect the consumption for all others
Quasi public goods: Goods that have some but not all characteristics of public goods
Direct tax: one that taxes the income of people and firms and that cannot be avoided
indirect tax: a tax levied on goods and services
Polluter pays principle: any measure, such as a green tax, whereby the pullet pays explicitly for the pollution caused
Tradable permit: A permit that allows the owner to permit a certain amount of pollution. And be sold to another polluter if not used very much.
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