Economics diagrams

• Capital goods


  Goods used in the production of other goods
• Consumer goods


  Goods used for final consumption
• Production possibility frontier


  • Represents the maximum combination of capital goods and consumer goods that can be produced with available resources and technology
• Outward shift in production possibility frontier


  Balanced economic growth
• Increase in production possibility where change in technology affects the output of capital goods but not the output of consumer goods


  Point W currently unattainable
• Impact of war on production possibility frontier

  Frontier shifts inward
• Demand curve


  Shows the quantity demanded at each price
• Extension of quantity demanded

  Due to a fall in the price of the product
• Contraction in demand


  Movement from A to B
• Decrease/fall in demand


  Shift from D1 to D2
• Increase in demand


  Demand shifts right; market demand is the sum of demand for individual firms
• Complements


  • Goods that are used together
• Substitutes


  • Goods that can be used in place of one another
• Supply curve


  Shows the quantity supplied at each price
• Market equilibrium


  The point where the demand and supply curves intersect, determining the equilibrium price and quantity
• Decrease in market demand

  Shifts the demand curve left, impacting the equilibrium price and quantity
• Increase in market demand

  Shifts the demand curve right, impacting the equilibrium price and quantity
• Increase in market supply

  Shifts the supply curve right, impacting the equilibrium price and quantity
• Decrease in market supply

  Shifts the supply curve left, impacting the equilibrium price and quantity
• Decrease in the price of solar power

  Caused by an increase in the supply of solar power
• Increase in market demand for housing

  Causes a shortage at the original price, leading to an adjustment to a new market equilibrium
• Price inelastic demand curve

  • The increase in price is proportionally much larger than the fall in quantity demanded
• Price elastic demand curve

  • The increase in price is proportionally much smaller than the fall in quantity demanded
• Changing price elasticity of demand along a straight-line demand curve

  • PED is not the gradient; letters can be used to analyse the impact on total revenue at each point along the demand curve
• Unitary price elasticity of demand

  PED = -1 at the midpoint of a straight-line demand curve
• Price elastic supply curve

  • The increase in price is proportionally much smaller than the rise in quantity supplied
• Price inelastic supply curve

  • The increase in price is proportionally much larger than the rise in quantity supplied
• Healthcare market


  Excess demand (waiting list) when healthcare is provided free at the point of use e.g. NHS
• Consumer surplus


  The area under the demand curve and above the market price
• Producer surplus


  The area above the supply curve and below the market price
• Changes in consumer and producer surplus when price rises

  Consumer surplus decreases, producer surplus changes
• Total revenue


  Price multiplied by quantity
• Change in total revenue following a fall in price


  Total revenue changes
• Change in total revenue after a price increase


  Total revenue changes
• Impact of a fall in price on total revenue


  Total revenue changes from PxQ to P1xQ1
• Excess supply


  When quantity supplied exceeds quantity demanded at the market price
• Excess demand


  When quantity demanded exceeds quantity supplied at the market price
• Price ceiling


  Maximum legal price
• Price floor

  Minimum legal price
• Impact of a specific indirect tax on the market

  Shifts the supply curve up, increasing the equilibrium price and reducing the equilibrium quantity