Economics Year 10 Flashcards
Equilibrium
Refers to a state of balance in the economy where there is no technology to change. Supply=Demand. Both buyers and sellers are happy to exchange goods
Surplus
A fall in price
Shortage
A rise in price
Production Possibility Frontier
An economic model that is used to illustrate the economic problem and opportunity cost.
Incentive
Something that motivates an individual to perform an action.
Perverse incentives
An incentive that has undesirable consequences contrary to their intended objective
Types of economic systems
Capitalism and communism
Capitalism
Where the government does not intervene
Public education and healthcare do not exist
Decisions are driven by individual profit
Prices are determined by supply and demand
Communism
Where economic decisions are made by the government
Collective goals
Government owns all resources and set prices
No private property
Consumers have very little to no power
Sustainability
Meeting the needs of the present without compromising the ability of future generations to meet their own needs
Demand
The amount a consumer is both willing and able to pay at a particular price and time
Law of demand
Refers to the inverse (negative) relationship between price and quantity demanded. Buyers are willing and able to buy more goods at a lower price. As this price rises, demand contracts.
Non price factors affecting demand
The price of a substitute good The price of a complementary good Income Advertising and media Tends and preferences Seasonal Population
Supply
Supply refers to the amount a producer is willing to supply at a particular price and time
The law of supply
The law of supply is that firms will supply more at a higher price to maximise their profit. As prices rise, supply expands. As price falls, supply contracts. There is a positive relationship between price and quantity supplied.
