Key Terms Flashcards
Scarcity
Economics resources are limited relative to society’s desire for goods and services
Economic good
A good or service whose production requires the use of scarce resources
Free good
A good or service which can be enjoyed without the need of scarce resources
Opportunity cost
The benefit that would have been enjoyed from the best alternative choice
Production possibility curve
The max output of combinations of good and services that can be produced through the full and efficient employment of of society’s economic resources.
Investment
The production of additional units of capital, increasing society’s total economic resources.
Specialisation
Productive activity by individuals, firms and countries focusing upon narrow range of output. -division of labour
Market
Where buyers and sellers come into contact and engage in trade.
Demand
The quantity of a product that a consumer is Williams and able to buy in a period of time
Supply
The quantity of a product a firm is willing and able to produce in a period of time
Income effect of a price change
The effect of on quantity demanded of a price change causing consumer real income to change.
Marginal utility
The additional utility enjoyed when a consumer increases quantity demanded by a single unit
Consumer surplus
The utility received by a customer over and above the price that has been paid for a product. When the consumer is willing and able to pay more than the marker price.
Giffen good
A product where the price and quantity demanded are positively related
Price mechanism
The dynamic whereby the market price rise and fall to eliminate excess demand and excess supply, an efficiently functioning price mechanism will move the markets equilibrium
