Definitions Flashcards
Opportunity cost
The value of the next best alternative foregone.
(C)apital
Physical goods that can be used in the production process
(E)ntrepreneurship
Entrepreneurs are people who take risks and draw all of the factors of production together.
(L)and
Natural resource e.g coal, oil, water wheat.
(L)abour
Human capital which is the workforce of the economy
PPF
These curves depict the maximum production potential of an economy
Specialisation
When each worker completes a specific task in the production process
Demand
The ability and willingness to buy a product at a given price and a time.
The law of Diminishing marginal utility
The satisfaction derived from the consumption of an addition unit of a good will decrease as more is consumed
Consumer surplus
The difference between the price that the consumer is willing to pay and the price they gave to pay.
Producer surplus
The difference between the price that they are willing to produce that product and the price that they are willing to produce at
Free market economies
When economic decision are taken by private individuals and firms, and private individuals own everything. No gov. intervention
Resources are allocated through price mechanism
Command economy
Government allocates all scarce resources.
Key feature of communist society.
Mixed economy
When private and state ownership coexists.
Price Elasticity of Demand (PED)
(% change in quantity demanded)/ (%change in price)
Income Elasticity of Demand (YED)
(% change in quantity demanded)/(% change in income)
Cross Elasticity of Demand (XED)
(% change in quantity demanded of A)/ (% change in price of B)
Supply
The willingness and ability to provide goods or services at a particular price at a given moment in time.
Price elasticity of Supply (PES)
(% change in quantity supplied)/(% change in price)
