MarketSystemIGCSE Flashcards
Exporters
Firms that sell overseas
Price
The amount of money that goods or services are exchanged for in a transaction
Market
A set of arrangements allowing buyers and sellers to communicate and exchange goods and services
Demand
the quantity of a good or service individuals are willing to purchase at various prices and it Depends on individuals’ needs and wants as well as their income
Price Mechanism
The system in a market economy whereby changes in price in response to changes in demand and supply have the effect of making demand equal to supply.
Demand Curve
A graph of the relationship between the price of a good and the quantity demanded.
Effective Demand
Demand supported by the ability to pay for a good or service
Inverse Relationship
The relationship between two variables that change in opposite directions for example: product price and quantity demanded.
Complementary Goods
Products and services that are used together. When the price of one falls the demand for the other increases (and conversely).
Inferior Goods
Goods for which demand tends to fall when ‘income’ rises.
Normal Goods
Goods for which demand goes up when income is higher and for which demand goes down when income is lower.
Substitute Goods
goods that can be used to replace the purchase of similar goods when prices rise
Shift in the demand curve
a movement to the left or tight of the entire demand curve when there is a change in any factor affecting demand except the price
Supply Curve
A graph illustrating how much of a product a firm will sell at different prices.
Advalorem Tax
A tax levied as a percentage of the price of a good
Indirect Taxes
Taxes imposed by the government on spending
Subsidy
A government payment that supports a business or market
Equilibrium Price
the price that balances quantity supplied and quantity demanded
Excess Demand
when quantity demanded is more than quantity supplied
Excess Supply
when quantity supplied is more than quantity demanded
Market Clearing Price
Price where the amount supplied in a market matches exactly the amount demanded.
Total Revenue
Price x Quantity; the total amount of money a firm receives by selling goods or services
Elastic Demand
A situation in which consumer demand is sensitive to changes in price.
Inelastic Demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product.
Price Elasticity of Demand
A measure of how responsive demand for a product is to changes in price
Factors of Production
Land Labor Capital Entrepreneurship
Land
One of the factors of production. Natural factors needed to produce including the land used and all raw materials
Labour
One of the factors of production - workers
Capital
One of the factors of production. Man made factors needed to produce including buildings machinary money
Entreprenuership
One of the factors of production. Creatively combining natural resources human labor and capital in unique ways to develop new and and useful goods and services
Scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Basic Economic Problem
Allocation of a nation’s scarce resources between competing uses that represent infinite wants
Choice
Decision made or course of action taken when faced with a set of alternatives.
Needs
Items necessary for existence such as clothing food and shelter.
Wants
Goods that are purchased to add comfort or pleasure to life
Opportunity Cost
Cost of the next best alternative use of money time or resources when one choice is made rather than another
Unitary elasticity
A situation in which total revenue remains the same when prices change. (PED = 1)
Perfectly Elastic
In this special case the demand curve is horizontal meaning consumers have an instantaneous & infinite response to a change in price
Perfectly Inelastic
When buyers are completely unresponsive to a change in price. When the calculated elasticity is 0
Economics
study of how people and societies use limited resources to satisfy unlimited wants; the management of scarcity and choice
Surplus
A situation in which quantity supplied is greater than quantity demanded (also excess supply)
Shortage
A situation in which quantity demanded is greater than quantity supplied (also excess demand)
Services
Actions or activities that one person performs for another
Supply
How much of a good or service a producer is willing and able to produce at different prices.
