Vocab

Question 1

Substitutes

Answer 1

Goods that can be used in place of another

Question 2

Subsidies

Answer 2

Grants given by the government to encourage the production or consumption of a particular good or service/ lower costs of production

Question 3

Public good

Answer 3

Non rivalry— consumption doesn’t reduce availability

Non excludable— once it’s provided can’t stop someone from benefitting

Question 4

Property rights

Answer 4

Legal entitlement to use and sale of property rights plus legal rights tat others have or do not have over a property

Question 5

Specialisation

Answer 5

Where a production process is broken into many stages each done by a small group of people or an individual

Question 6

PPF

Answer 6

A curve that shows the combination of two goods that can be produced in an economy if all resources are fully and efficiently employed

Question 7

Producer surplus

Answer 7

The difference between the actual price a produce receives for its good and the lower price it is willing to accept

Question 8

Private costs

Answer 8

Costs directly incurred by an individual consumer or producer when they engaged in an economic activity

Question 9

Private benefits

Answer 9

Benefits directly gained by an individual consumer or producer when they snagged in an economic activity

Question 10

Price mechanism

Answer 10

The interaction between demand and supply to resolve the issue of scarcity and infinite wants

Question 11

PES

Answer 11

Measures the responsiveness of supply to a change in price

Question 12

PED

Answer 12

Measures the responsiveness of demand for a good to a change in price

Question 13

Positive statement

Answer 13

Statement that can be testified true or false by referring to facts

Question 14

Normative statement

Answer 14

A form of value judgement and cannot be proven true or false

Question 15

National Minimum Wage

Answer 15

Price floor on wages set by governments below which is illegal for employees to be workers

Question 16

Mixed economy

Answer 16

An economy where resources are owned and allocated by both private sector and government

Question 17

Minimum Guaranteed Price

Answer 17

Price floor set be government onto agriculture in order to stabilise prices and farmers’ income

Question 18

Market Failure

Answer 18

When price mechanism fails to allocate resources efficiently

Question 19

Indirect tax

Answer 19

Levied by the government onto a particular good or service to discourage its production or consumption to raise its production costs

Question 20

YED

Answer 20

Measures the responsiveness of demand for a good to a change in income

Question 21

Incidence of tax

Answer 21

The proportion of the tax paid by producers and consumers

Question 22

Government failure

Answer 22

When the government intervention into an economic activity leads to net loss in economic welfare

Question 23

Free Roder

Answer 23

Someone who receives the benefits that others have paid for without making any contributions themselves

Question 24

Free Market economy

Answer 24

An economy where resources are all privately owned and the price mechanism will act to allocate scarce resources

Question 25

External costs

Answer 25

Costs incurred by a third party which is not part of an economic transaction

Question 26

External benefits

Answer 26

Benefits gained by a third part which is not part of an economic transaction

Question 27

XED

Answer 27

Measures the responsiveness for a good to change in the price of another good

Question 28

Consumer surplus

Answer 28

The difference between what the consumers are willing to pay and what they are actually paying

Question 29

Complements

Answer 29

Goods that are jointly used with another

Question 30

Command economy

Answer 30

An economy where all resources are publicly owned and state government will intervene to allocate scarce resources

Question 31

Asymmetric information

Answer 31

Where one party is better informed than the other

Question 32

Opportunity cost

Answer 32

The value of next best opportunity forgone