Key Words

Question 1

Economics

Answer 1

The allocation of scare materials

Question 2

Oligopoly markets

Answer 2

Markets dominated by few businesses e.g. The phone market

Question 3

Market

Answer 3

Meeting place for buyers and sellers

Question 4

Law of demand

Answer 4

The law that consumers will buy more at a lower price than at a higher price

Question 5

Specialisation

Answer 5

When we concentrate on a product or task

Question 6

Barter system

Answer 6

A old method of exchange, eg exchanging goods for other services and goods in return

Question 7

Monopoly market

Answer 7

A market containing a single firm that has or is close to total control of the sector

Question 8

Monopolistic competition

Answer 8

Freedom of entry and exit, but firms have differentiated products.

Question 9

Contestable markets

Answer 9

An industry with freedom of entry and exit, low sunk costs.

Question 10

Division of labour

Answer 10

Separation of tasks, allowing participants to specialise in certain areas of the economic system

Question 11

Opportunity cost

Answer 11

To make a decision you have to give up another choice

Question 12

The multiplier effect

Answer 12

The way money is passed on, creating wealth my spending so that the economy grows

Question 13

Equilibrium

Answer 13

When injections=withdrawals

Question 14

SecuritieS

Answer 14

Rights to assets, mainly in the form of shares

Question 15

DAX

Answer 15

Germanys stock exchange market

Question 16

FDI (foreign direct investment)

Answer 16

Money being invested into the UK from another country

Question 17

AD (equation)

Answer 17

AD= C (consumption) + I (investment) + G (gov spending) + ( X (exports) - M (Imports)

Question 18

What is consumption?

Answer 18

Spending on consumer goods and services.

60% of AD

Question 19

MPC

Answer 19

Marginal Propensity to consume- the change in consumer spending following a change in income.

Question 20

Law of demand

Answer 20

If the price of a product rises, the quantity demanded falls.

Question 21

Speculative goods

Answer 21

E.g. Shares and property
If you pay a lot for it you feel like you will get a big return. You expect to make money as the value if expected to increase.

Question 22

Veblen/ snob goods

Answer 22

E.g. Diamonds
They confer status on the buyer
Demanded because few people can buy them at their high price.

Question 23

Giffen goods

Answer 23

• type of inferior good where demand increases when price increases
• e.g bread would not fall in demand if price increases as it is a staple food so poor people would just fill up on bread and therefore buy more

Question 24

Substitution effect

Answer 24

If the price of a good rises, consumers will buy less of that good and more of others because it is now relatively more expensive than other goods.

Question 25

Income effect

Answer 25

If the price of a good rises, the real income of consumers will fall.

Question 26

Law of supply

Answer 26

As the price rises, more will be supplied and vice versa

Question 27

What is the most significant factor affecting supply?

Answer 27

Price

Question 28

Indirect tax

Answer 28

A tax on spending e.g. VAT, customs and exise duties (taxes on alcohol and cigarettes)

Question 29

How do taxes effect supply?

Answer 29

Producers see it as an extra cost so supply less

Question 30

Direct taxes

Answer 30

Taxes on income

Question 31

How do subsidies affect supply?

Answer 31

Encourages producers to supply more so it shifts supply to the right

Question 32

What are the two types of indirect taxes?

Answer 32

* ad valorem- a percentage e.g. vAT | * specific tax- eg £2 per product

Question 33

What determines the price of a good or service in a free market?

Answer 33

Supply (producer) and demand (consumer)