Economics A-level

• Positive Statement


  A statement that can be tested to see if it's correct or not
• Normative Statement


  A statement that has a value judgement and can't be refuted by looking at evidence
• Need

  Something necessary for human survival
• Want


  Something that is desirable
• Economic welfare


  The economic wellbeing of an individual or group of people

  (Human happiness)
• Capital good


  A good used in the production of other good and services
• Factors of production

  Land, Labour, Capital, Enterprise
• Fundamental Economic Problem is


  scarcity and that it results from limited resources and unlimited wants
• Scarcity


  Choices have to made how scarce resources are going to be allocated
• Opportunity cost


  The cost of giving up the next best alternative
• Productive efficiency


  When the average total costs of production is minimised
• Allocative efficiency


  Available resources are used to produce the best combination of goods and services that best match people's preferences
• Demand


  The quantity of a good or service that consumers are willing and able to buy at a given time
• Normal good


  A good for which demand increases when income increases

  
  

  IED > 1
• Inferior good


  A good for which demand increases when income falls

  
  

  IED < 1
• Price elasticity of demand


  Measures the extent to which the demand of a good changes in response to a change in the price of that good

  
  

  %QD/%P
• Income elasticity of demand

  Measures the extent to which the demand of good changes in response to a change in income

  
  

  %QD/%Y
• Cross elasticity of demand


  Measures the extent in which the demand of a good changes in response to a change in the price of another
• Price elasticity of supply


  Measures the extent to which the supply of a good changes in response to a change in price of that good
• Market equilibrium


  Planned demand = planned supply. No excess demand or supply, and no reason for the price to change
• Joint supply


  When one good is produced, another good is produced from the same raw material

  
  

  Eg. Beef and Leather
• Competing supply


  When raw material is used to produce one good CANT be used to produce another

  
  

  Eg. Biofuels and Wheat
• Joint demand


  occurs when demand for two goods is interdependent.

  E.g. it is no good having a printer without the ink to go with it
• Complementary good


  A good in joint demand, or demanded at the same time as another
• Supply


  The quantity of a good or service that all firms plan to sell at given prices at a given time
• Substitute good


  A good in competing demand, a good which can take place of the other good
• Composite demand


  Demand for a good that has more than one use
• Derived demand


  Demand for a good that is an input into the production of another

  
  

  Eg. Labour
• Production


  Turns inputs into outputs
• Productivity


  Output per unit of input
• Labour productivity


  Output per worker
• Specialisation


  A worker only doing one task or a narrower range of tasks but only makes sense if there is a system of trade.
• Division of labour


  Different workers perform different tasks in producing a good or service
• Short run production


  The time period in which at least one factor of production is fixed and can't be varied
• Long run production


  The time period in which no one factors of production are fixed and in which all the factors of production can be varied
• Fixed cost


  Cost of production which in the short run does not change with output
• Variable cost


  Cost of production which changes with the amount that is produced
• Total cost


  The whole cost( fixed and variable) of producing at a particular level of outout
• Average costs


  Total cost of production divided by output

  
  

  ATC = AFC+AVC
• Economy of scale


  As output increases the LONG RUN average cost falls