Markets in Action Definitions

Question 1

Specialisation

Answer 1

Specialisation is where individuals, firms, regions and nations concentrate on producing some goods and services rather than others.

Question 2

Productivity

Answer 2

Output or production of a good/service per worker.

Question 3

Subsidy

Answer 3

Payment by a governing body to encourage the production or consumption of a product.

Question 4

Factor of production

Answer 4

The resource inputs that are available in an economy for the production of goods/services.

Question 5

Land

Answer 5

Natural resources in an economy

Question 6

Goods

Answer 6

Tangible products that can be seen/touched cars, washing machines, food

Question 7

Services

Answer 7

Intangible products, that cannot be touched/seen. Insurance/banking ect

Question 8

Labour

Answer 8

Quality and quantity if human resources

Question 9

Entrepreneurship

Answer 9

The willingness of entrepreneurs to take risks and organise production

Question 10

Capital

Answer 10

Man made aids to production.

Question 11

Entrepreneur

Answer 11

Someone who bears the risk of the business and who organises production.

Question 12

Choice

Answer 12

The selection of appropriate alternatives

Question 13

Opportunity cost

Answer 13

The cost of the next best alternative, which is foregone when a choice is made.

Question 14

Scarcity

Answer 14

A situation where there are insufficient resources to meet all wants.

Question 15

Economics

Answer 15

The study of how to allocate scarce resources

Question 16

Economic problem

Answer 16

How to allocate scarce resources among alternative uses or competing wants.

Question 17

Household

Answer 17

A group of people whose spending decisions are connected.

Question 18

Economic Growth

Answer 18

Change in the productive potential of an economy

Question 19

Productive Potential

Answer 19

Maximum output that an economy is capable of producing.

Question 20

Economic System

Answer 20

Way in which production is organised

Question 21

Production Possibility curve

Answer 21

The allocation of resources between two products in production, given current resources and state of technology.

Question 22

Productive Efficiency

Answer 22

Where production takes place using the least amount of resources.

Question 23

Consumer Surplus

Answer 23

The difference between the price a consumer is willing and able to pay and the price that is required to make the purchase.

Question 24

First Law of Demand

Answer 24

Inverse relationship between price and the quantity demanded for a goods/service.

Question 25

Shift in Demand

Answer 25

When a non price factor leads to an increase/decrease in demand.

Question 26

PED

Answer 26

The responsiveness of quantity demanded given a change in price. % change in quantity / % change in price.

Question 27

Normal Good

Answer 27

Goods for which an increase in income leads to an increase in demand.

Question 28

YED

Answer 28

The responsiveness of demand given a change in income. % change in quantity / % change in income.

Question 29

Inferior Good

Answer 29

Goods for which an increase in income leads to a decrease in demand.

Question 30

XED

Answer 30

The repsonsiveness of quantity demanded of one good given a change in price of another. % change in demand for good 1 / % change in price of good 2.

Question 31

Complementary Goods

Answer 31

Goods for there is joint demand.

Question 32

Substitute Good

Answer 32

Competing goods.

Question 33

Producer Surplus

Answer 33

The difference in price a producer receives for a good / service and the actual price they are willing to accept for the good/service.

Question 34

Indirect Tax

Answer 34

A tax levied on the consumption of a good/service.

Question 35

Subsidy

Answer 35

A subsidy to encourage the production and consumption of a good/service.

Question 36

PES

Answer 36

The responsiveness of supply given a change in price. % change in quantity supplied / % change in price.

Question 37

Market Failure

Answer 37

Where the free market mechanism fails to achieve economic efficiency.

Question 38

Allocative Efficiency / Opposite for Inefficiency.

Answer 38

Where scarce resources are used to produce goods/services that consumers actually demand in the quantities they desire so consumer welfare is maximised.

Question 39

Positive / Negative Externality

Answer 39

When an action taken by one economic agent has a favourable / negative effect on a third party, not directly involved.

Question 40

Private Cost

Answer 40

The costs directly incurred by those undertaking particular economic activity.

Question 41

Private Benefit

Answer 41

The benefits directly accruing to those those undertaking a particular economic activity.

Question 42

Social Cost

Answer 42

Private cost + external cost of an economic activity.

Question 43

Social Benefit

Answer 43

Private benefit + external benefit of an economic activity.

Question 44

Merit Good

Answer 44

A good of which its consumption is better for the consumer than they realise.

Question 45

Demerit Good

Answer 45

A good of which its consumption os worse for the consumer than they realise.

Question 46

Public Good

Answer 46

A good which is non excludable and non rival and not provided by the free market due to the free rider problem.

Question 47

Non Rivalrous

Answer 47

A situation where the consumption of the goods doesn’t reduce its availability to others.

Question 48

Private Goods

Answer 48

A good which is rivalrous and excludable.

Question 49

Markets

Answer 49

Where buyers and sellers meet/come into contact for the purpose of trading.