Exam Style Definitions (AS Economics 9708)

• Scarcity – Limited resources but unlimited wants.
• Opportunity Cost – The next best alternative forgone when a choice is made.
• Positive Statement – A statement based on a fact that can be tested or proven.
• Normative Statement – A statement based on opinion or value judgement, not provable.
• Ceteris Paribus – Latin for “other things being equal.”
• Factors of Production – Land, labour, capital, and enterprise.
• Human Capital – Skills, knowledge, and experience of workers.
• Physical Capital – Man‑made resources used in production (e.g., machinery).
• Specialisation – Concentration on producing certain goods or services.
• Division of Labour – Splitting production into tasks among workers.
• Market Economy – Resources allocated by demand and supply with minimal government role.
• Planned Economy – Government controls all production and resource allocation.
• Mixed Economy – A Combination of private and public sector decision‑making.
• Production Possibility Curve (PPC) – Shows maximum output combinations of two goods with given resources.
• Consumer Goods – Goods for present consumption.
• Capital Goods – Goods used to produce future output.
• Private Goods – Excludable and rival goods.
• Public Goods – Non‑excludable and non‑rival goods.
• Merit Goods – Goods under‑consumed due to imperfect information.
• Demerit Goods – Goods are over‑consumed due to imperfect information.
• Demand – Quantity of a product that consumers are willing and able to buy at different prices.
• Supply – Quantity of a product that producers are willing and able to sell at different prices.
• Price Elasticity of Demand (PED) – Responsiveness of demand to changes in price.
• Price Elasticity of Supply (PES) – Responsiveness of supply to changes in price.
• Income Elasticity of Demand (YED) – Responsiveness of demand to changes in income.
• Cross Elasticity of Demand (XED) – Responsiveness of demand for one good to price changes of another.
• Consumer Surplus – Difference between willingness to pay and actual price paid.
• Producer Surplus – Difference between the price received and the minimum acceptable price.
• Market Equilibrium – The point where demand equals supply.
• Market Failure – Inefficient allocation of resources by the price mechanism.
• Externalities – Costs or benefits to third parties not reflected in market prices.
• Free Rider Problem – People benefit from public goods without paying.
• Monopoly – Single seller with high barriers to entry.
• Oligopoly – Few large firms dominate a market.
• Perfect Competition – Many firms, homogeneous products, no barriers to entry.
• Monopolistic Competition – Many firms, differentiated products, low barriers to entry.
• Allocative Efficiency – Resources are used where consumer satisfaction is maximised (P = MC).
• Productive Efficiency – Producing at the lowest possible cost (AC minimised).
• Dynamic Efficiency – Efficiency achieved through innovation over time.
• X‑Inefficiency – Waste due to lack of competition.
• Unemployment – People willing and able to work but without jobs.
• Minimum Wage – Legal wage floor set by the government.
• Circular Flow of Income – Model showing interaction between households and firms.
• Injections – Additions to income flow (investment, government spending, exports).
• Withdrawals – Leakages from income flow (savings, taxes, imports).
• GDP – Total value of goods and services produced in an economy.
• Real GDP – GDP adjusted for inflation.
• Inflation – Sustained rise in the general price level.
• Demand‑Pull Inflation – Inflation caused by excess demand.
• Cost‑Push Inflation – Inflation caused by rising production costs.
• Balance of Payments – Record of all economic transactions with the rest of the world.
• Fiscal Policy – Use of government spending and taxation to influence the economy.
• Monetary Policy – Use of interest rates and money supply to influence the economy.
• Supply‑Side Policies – Measures to improve efficiency and productive capacity.
• Aggregate Demand (AD) – Total demand in the economy: C + I + G + (X – M).
• Aggregate Supply (AS) – Total output that firms are willing to produce at different price levels.
• Phillips Curve – Shows the relationship between inflation and unemployment.
• Globalisation – Increasing integration of economies worldwide.
• Protectionism – Use of tariffs, quotas, and barriers to restrict trade.
• Trade Blocs – Groups of countries with trade agreements.
• IMF (International Monetary Fund) – Provides loans and stabilises exchange rates.
• World Bank – Provides funds for development projects.
• WTO (World Trade Organisation) – Promotes free trade and resolves disputes.
• Economic Development – Improvement in living standards beyond GDP growth.
• HDI (Human Development Index) – Composite measure of health, education, and income.