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IB Economics - 2021 finishers > Definitions > Flashcards

Flashcards in Definitions Deck (86)
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1

Demand

The amount of a good or service that consumers are willing and able to buy at different prices

2

Opportunity Cost

The best alternative foregone when an economic decision is made

3

Inferior Good

An inferior good is a good whose demand decreases when consumer income rises and vice versa. It has a negative YED value

4

Supply

The amount of a good or service that producers are willing and able to supply at different price

5

Competitive supply

Two goods competing for the same resources for production

6

Complementary goods

Goods that are consumed with each other.  They have a negative XED value

7

Joint supply

Goods that are supplied together from the production of one product.

8

Indirect taxes

Taxes on spending of goods and services by consumers, collected by the supplier on behalf of the government.

9

Producer surplus

The price received by a producer in excess of the price that the producer would be willing and able to offer for sale.

10

Allocative efficiency

Where resources are allocated in such a way that neither too much nor too little is produced from society’s point of view.

11

Subsidies

Money given to firms by the government to (choose one)

  • Reduce production costs 
  • Reduce prices
  • Increasing supply
  • Increase consumption, 
  • Increase investment and employment
  • Protect domestic industries from imports

12

Substitute

A good that offers similar benefits to the consumer as another good. It has a positive XED value

13

Normal goods

Goods that will increase in demand as income rises and vice versa.  They have a YED greater than 0.

14

Market

The interaction between buyers and sellers in order to exchange goods or services

15

Consumer surplus

The difference between what consumers are willing and able to pay and the market price.

16

Primary commodities

A raw or unprocessed material that is harvested or extracted

17

Cross price elasticity of demand

The responsiveness of the demand of one good to a change in the price of another good

18

Price elasticity of demand

The responsiveness of quantity demanded to a change in price

19

Income Elasticity of Demand

A measure of the responsiveness of demand to a change in income.

20

Price elasticity of supply

The responsiveness of quantity supplied to a change in price

21

Luxury good

A luxury good is a good for which demand increases more than proportionally as income rises. They are not necessary for living, but are deemed as highly desired within a culture or society

22

ad valorem taxes

An indirect tax which is a percentage of the selling price

23

Underground (Informal) Markets

Markets where there is economic activity that is unrecorded (illegal/not taxed) by the government.

24

Price Floor

A minimum price set by the government which is above the market equilibrium price.

25

Price Ceiling

A maximum price set by the government which is below the market equilibrium price.

26

Specific taxes

An indirect tax which is a fixed amount of tax per unit sold.

27

Demerit goods

Goods or services considered to be harmful to people which are over-provided by the market and therefore over-consumed

28

Positive externalities of consumption

Positive effects on third parties that arise when a good or service is consumed.

29

Merit Goods

Goods and services considered to be beneficial society that would be underprovided by the market and under-consumed

30

Positive externalities of production

Positive effects on third parties that arise when a good or service is produced..