IB Economics HL Defs

• Ceteris paribus


  all other things are being held equal
• positive economics


  matters of economics that can be proven to be right or wrong by looking at the facts
• normative economics


  matters of economics that are based upon opinion and so are incapable of being proven to be right or wrong
• scarcity


  the limited availability of economic resources relative to societys unlimited demand for goods and services
• land


  the physical factor of production. It consists of natural resources
• labour


  the human factor of production. It is the physical and mental contribution of the existing work force to production
• capital


  the factor of production that is made by humans and is used to produce goods and services. It occurs as a result of investment
• entrepreneurship


  the factor of production involving organizing and risk-taking
• opportunity cost


  is the next best alternative foregone when an economic decision is made
• free good


  goods or services which are unlimited in supply and have no opportunity cost. the have unlimited supply at market price zero
• economic good


  a good or services which is relatively scarce and so have a price. An opportunity cost is involved if it is consumed.
• utility


  the satisfaction or pleasure that an individual derives from the consumption of a good or service
• production possibility curve


  shows the maximum combination of outputs that can be production by an economy in a given time period
• actual output


  the actual production of goods and services in an economy over a given time period
• actual growth


  occurs when previously unemployed factors are put into production. It is represented by an movement from a point within a PPC to a new point nearer to the PPC
• Potential output


  the possible production that would be possible in an economy if all available factors were being employed.
• Potential growth


  occurs when the quantity/quality of factors of production within an economy is increased. It is presented with an outward shift of the PPC.
• Economic growth


  the growth of real output in an economy over time. Usually measured in real GDP
• economic development


  a broad concept which involves improvement in standard of living, reducing in poverty, improved health and education.
• sustainable development


  development that meets the needs of the present without compromising the ability of future generations to meet their own needs
• free market economy


  an economy where the means of production are privetly held by individuals and firms. Demand and supply determine how much to produce, how/how many to produce, an for whom to produce.
• planned economy


  an economy where the means of production are owned by the state. The state determines how much to produce how much to produce, how/how many to produce, and for whom to produce.
• Transition economy


  an economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system.
• demand


  the willingness and ability to purchase a quantity of a good or service at a certain price over a given time period
• law of demand


  as a price of a good falls, quantity demanded increases
• velben goods


  goods that are the exceptions to the law of demand, where at high prices, as price increases, then so does the demand
• giffen goods


  goods that are exceptions to the law of demand where at very low prices, with consumers on low incomes and dependent upon the good for survival, as price rises, then so does demand
• supply


  the willigness and ability of a producer to produce a good or service at a given price
• law of supply


  as the price of a good rises the quantity supplied rises
• maximum price


  a price imposed by the authority and set below the market price
• minimum price


  a price imposed by the authority and set above the market price
• buffer stock scheme


  a situation where a government intervenes in a market to stabilize prices by buying up surplus stock when prices would go too low or by supplying stock from a previously built up 'buffer stock' when prices would go too high
• price elasticity of demand

  a measure of responsiveness of the quantity demanded of a good or service when there is a change in its price
• elastic demand


  where a change in the price of a good or service leads to a proportionately larger change in the quantity demanded
• inelastic demand


  where a change in the price of a good or service leads to a proportionately smaller change in the quantity demanded
• cross price elasticity


  measure of the responsiveness of the demand for one good or service to a change in price for another good or service
• income elasticity


  measure of the responsiveness of demand for a good or service to a change in income
• normal goods


  a good where the demand increases as income increases
• inferior goods


  a good where the demand for it decreases as income increases
• price elasticity of supply

  measure of the responsiveness of the quantity supplied of a good or service when there is a change in its price