Economic Definitions Flashcards
Memorize economic terms
Scarcity
Limited in supply
Limited Means
e.g Time = Only 24 hours, Income = Limited money flowing into household, Skills = Can either do it or not
Choice
Selecting between alternatives
Consumer
Individual who uses goods + services
Household
A person or group living under one roof
Opportunity Cost
The next best alternative foregone when a choice is made (foregone means given up)
Wants
Something that is desired or wished for
Needs
Something that is required for living
Conflict
Occurs when people have opposing values
Compromise
A decision made that satisfies both parties values
Values
Those fundamental beliefs and principles that determine the decisions we make
Consumer Demand
The quantity of a good or service an individual is willing and able to purchase at a range of prices
A Demand Schedule
A table setting out the price and quantity demanded
The Law Of Demand
As price increases, quantity demand decreases. Ceteris Paribus and vice versa
Ceteris Paribus
All other things being equal. All other factors remain unchanged, only the price changes
SPIT
S = Shift in the graph P = Price of related goods + services I = Income (If income increases there will be a decrease in demand and vice versa) T = Tastes & Fashions (If good/service is fashionable there will be a increase in demand and vice versa)
Complementary Goods
Goods usually consumed together (pen and paper, shoes and socks, milk and cereal etc)
Substitute Goods
Goods which can be used in place of each other (pen or pencil, KFC or BK, iPhone or Samsung, tea or coffee etc)
Necessities
Goods essential for living
Inferior Goods
low quality goods and services that we demand less of as our income increases
Normal Goods
Good quality good and services we demand more of as our income increases
Luxury Goods
High quality goods and services we demand more of as our income increases significantly
Disposable Income
Income left over once tax payments and other deductions have been made
