Economics Definitions Flashcards Preview

Economics HL IB > Economics Definitions > Flashcards

Flashcards in Economics Definitions Deck (142)
Loading flashcards...
1

GDP

(Gross Domestic Product)
Total value of all the financial goods and services produced in an economy in a year.

2

GNI

(Gross National Income)
Total income that is earned by a country's factors of production REGARDLESS OF WHERE THE ASSETS ARE LOCATED

3

NNI

(Net National Income)
GNI taking into account the DEPRECIATION of capital/capital consumption.

4

Opportunity Cost

Cost of next best opportunity forgone.

5

Market

Where buyers and sellers come together to carry out economic transactions.

6

Positive Economics

Economic theories or statements that are falsifiable (yes or no).

7

Negative Economics

Theories/statements that are opinions and therefore cannot be PROVEN to be correct.

8

Planned Economy

An economic system in which all resources ate collectively owned and government bodies allocate scarce resources centrally.

9

Free Market Economy

An economic system in which decisions on what and how to produce goods and services are taken by private firms which are free from government control. Prices are therefore used to ration goods and services.

10

Utility

A measure of the satisfaction consumers gain from consuming particular goods and services in particular quantities.

11

Total utility

Total satisfaction of bundle of products consumed

12

Marginal utility

Extra satisfaction gained with every extra unit of the good or service consumed.

13

Production possibility curves

Shows the different combinations of 2 goods and services an economy can produce in given time period if all the resources in the economy are fully employed and the state of technology is fixed.

14

Demand

the quantity of a good or service consumers are willing and able to purchase at a given price in a given time period.

15

Law of demand

As the price of a product falls the quantity demanded of the product will usually increase, ceteris paribus.

16

Supply

The quantity of a good or service that producers are willing and able to produce at a given price in a given time period.

17

Law of supply

As the price of a product rises the quantity supplied of a product usually increases, ceteris paribus.

18

Demand Function

A function of price that specifies the quantity demanded of a product at each price.
(Qd=a-bP)

19

Supply function

A function of price that specifies the quantity supplied of a product at each price.
(Qs=c+dP)

20

Equilibrium

when the quantity demanded of a product in a market is equal to the quantity supplied for the same product in a market. At this point there is neither excess supply (surplus) nor excess demand (shortage).

21

Consumer Surplus

The extra utility consumers gain from paying a price lower than the price they are prepared to pay.

22

Producer Surplus

The extra revenue producers gain from selling their output at a price that is higher than they are prepared to accept.

23

Allocative efficiency

When resources are allocated in the most efficient way. i.e. the point at which community surplus is maximised.
Occurs when average revenue is equal to marginal cost.

24

Community surplus

The sum of producer and consumer surplus.

25

Welfare loss

this occurs when community surplus is not maximised. It usually occurs because of market failure.

26

Economic growth.

Economic growth is the increase in a country's capacity for production. This can be measured by a rise in an economies GDP overtime and a shift towards in an economies PPC.

27

Intermediate good

Is a good which is produced and then used in the production of another good.

28

Elasticity

A measure of how responsive buyers or sellers are to changes in market conditions.

29

PED

(price elasticity of demand)
it is a measure of how much the quantity demanded of a product changes when there is a change in its price.

30

XED

(Cross elasticity of demand)
A measure of how responsive demand for one product is when there is a change in the price of another product.