economics ...

• Scarcity


  The fundamental economic problem that arises because resources are limited but human wants are unlimited
• Choice


  The act of selecting one option from a set of alternatives
• Opportunity cost


  The value of the next best alternative that is given up when a choice is made
• Economic methodology


  • Positive economics (what is)
  • Normative economics (what ought to be)
• Factors of production


  • Land
  • Labour
  • Capital
  • Enterprise
• Economic systems


  The way in which a country or region allocates its resources to satisfy the population's needs and wants
• Production possibility curves


  • Show the maximum combination of two goods that can be produced with available resources and technology
  • Illustrate the concept of opportunity cost
• Classification of goods and services

  • Private goods
  • Public goods
  • Merit goods
  • Demerit goods
• Demand


  The willingness and ability of consumers to purchase different quantities of a good at different prices during a given time period
• Supply


  The willingness and ability of producers to sell different quantities of a good at different prices during a given time period
• Price elasticity of demand

  A measure of the responsiveness of quantity demanded to a change in price
• Income elasticity of demand

  A measure of the responsiveness of quantity demanded to a change in income
• Cross elasticity of demand

  A measure of the responsiveness of quantity demanded for one good to a change in the price of another good
• Price elasticity of supply


  A measure of the responsiveness of quantity supplied to a change in price
• Consumer surplus


  The difference between the maximum price a consumer is willing to pay and the actual price paid
• Producer surplus


  The difference between the minimum price a producer is willing to accept and the actual price received
• Reasons for government intervention in markets

  • Market failure
  • Equity considerations
  • Macroeconomic objectives
• Methods of government intervention in markets

  • Taxes and subsidies
  • Price controls
  • Regulation
  • State provision of goods and services
• Income inequality


  The unequal distribution of income within a population
• Wealth inequality


  The unequal distribution of wealth within a population
• National income statistics


  Measures of the total output, income and expenditure of an economy
• Circular flow of income


  The continuous flow of money between firms and households in an economy
• Aggregate demand


  The total demand for all goods and services in an economy at a given price level and in a given time period
• Aggregate supply


  The total supply of all goods and services in an economy at a given price level and in a given time period
• Economic growth


  An increase in the productive capacity of an economy and the value of its total output of goods and services
• Unemployment


  A situation where people who are willing and able to work are not able to find suitable paid employment
• Inflation


  A sustained increase in the general price level of goods and services in an economy over time
• Government macroeconomic policy objectives

  • Economic growth
  • Full employment
  • Price stability
  • Favourable balance of payments
• Fiscal policy


  The use of government spending and taxation to influence the level of economic activity
• Monetary policy


  The use of interest rates and money supply to influence the level of economic activity
• Supply-side policy


  Policies aimed at increasing the productive capacity of an economy
• International trade


  The exchange of goods and services between countries
• Protectionism


  Government policies that restrict or regulate international trade
• Balance of payments


  A record of a country's transactions with the rest of the world
• Exchange rates


  The price of one currency in terms of another currency
• Utility


  The satisfaction or benefit that a consumer derives from the consumption of a good or service
• Indifference curves


  A graphical representation of the combinations of two goods that give a consumer the same level of satisfaction
• Budget lines


  A graphical representation of the combinations of two goods that a consumer can afford to buy given their income and the prices of the goods
• Market failure


  A situation where the free market fails to allocate resources efficiently
• Externalities


  The costs or benefits of an economic activity that affect third parties who are not directly involved in the activity