Key Terms Unit 1

Question 0

Capital

Answer 0

Equipment, machinery and buildings

Question 1

Basic economic problem

Answer 1

The finite resources available are insufficient to satisfy all human wants and needs

Question 2

Enterprise

Answer 2

Skills needed to organise other resources into production

Question 3

Opportunity cost

Answer 3

The benefit lost from the next best thing

Question 4

Production possibility frontier

Answer 4

Shows all possible combinations of capital and consumer goods that can be produced when all factors of production are employed

Question 5

Consumer goods

Answer 5

An item which is consumed

Question 6

Capital good

Answer 6

An item that can be turned into a consumer good

Question 7

Positive statement

Answer 7

Statements that are backed up by facts and figures

Question 8

Normative statements

Answer 8

Statements that are valued opinions

Question 9

Real income

Answer 9

Amount income has increased over time taking inflation and prices changes into account

Question 10

Nominal

Answer 10

The amount income has increased over time

Question 11

Free economy

Answer 11

Have very little intervention from government decisions on products are left up to firms

Question 12

Mixed economies

Answer 12

Decisions are taken by both firms and government. Most countries are mixed

Question 13

Planned economy

Answer 13

There is maximum government intervention on decisions

Question 14

Market

Answer 14

Buyers and sellers come to exchange goods

Question 15

Product market

Answer 15

A market for goods an services directly consumed

Question 16

Commodity market

Answer 16

A market for raw materials

Question 17

Labour markets

Answer 17

A market which sells labour for production

Question 18

Demand

Answer 18

The quantity of goods that consumers want over a given time

Question 19

Demand cure

Answer 19

The quantity of goods ands vices consumers want over a given price

Question 20

Supply

Answer 20

The quantity of goods and services that suppliers are willing to sell for a given price

Question 21

Supply curve

Answer 21

The quantity of goods an services suppliers want to supply over a range of prices

Question 22

Movement

Answer 22

Caused by a change in price

Question 23

Shift

Answer 23

Causes by other factors

Question 24

Joint supply

Answer 24

An output of one product leads to a rises in demand for anouther

Question 25

Market equilibrium

Answer 25

When quantity supplied equals quantity demanded

Question 26

Excess supply

Answer 26

Price rises don’t sell as much as hoped gaps between supply and demand lines in excess

Question 27

Excess demand

Answer 27

Price falls demand can’t be met movement down supply line gap between demand line and supply line is excess

Question 28

Consumer surplus

Answer 28

Area above equilibrium and below demand line

Question 29

Supplier surplus

Answer 29

Area above demand and below equilibrium line

Question 30

Price elasticity of demand

Answer 30

Responsiveness of demand following a change In price

%change quantity \ %change price

Question 31

Price elasticity of supply

Answer 31

Responsiveness of supply following a change in price

%change quantity suppied \ %change price

Question 32

Income elasticity of demand

Answer 32

Responsiveness to a change income in relation to demand

%change demand\ %change income

Question 33

Cross elasticity of demand

Answer 33

Responsiveness of demand for good B in relation to a price change of good A
%change demand B / %change price A

Question 34

Elastic

Answer 34

High response to a change in price

Question 35

In elastic

Answer 35

Low response to a change in price

Question 36

Total revenue

Answer 36

Total payments a firm receives fro selling a given quantity of goods

Question 37

Subsidy

Answer 37

Grant payed by the government to help keep production costs low and selling prices low